Tough Day at the Supermarket

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WASHINGTON, D.C.: A string of poor crops caused by below average rainfall in the midwest are finally catching up with consumers at the supermarket. With food prices in June reaching their highest levels in six years, everything from Wonder bread to Ben & Jerry's has gotten more expensive. Some economists predict that food price inflation, which has averaged a moderate 2.4 percent increase for the last few years, will surge as high as 7 percent by the end of the year. TIME's business editor Bill Saporito reports that while food prices are going up, their overall effect on inflation will be balanced out by lower energy prices. "You'll see the biggest price increases in foods consisting mostly of the commodities that are in short supply," says Saporito. "For example, ice cream prices are rising because a major ingredient, milk, has gotten more expensive. Cereal, on the other hand, is only about six percent grain, so even though corn supplies are at record lows, corn flakes are unlikely to cost more." Increasing competition in the food market is also likely to minimize the effect that the higher wholesale costs will have on consumers, says Saporito. The ongoing cereal wars, for example, have lowered prices by as much as 25 percent. Vegetable, coffee, and seafood prices have fallen as well. --Anita Hamilton