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Drought could drive up food prices at supermarkets

Published: Thursday, Aug. 16 2012 11:48 a.m. MDT

Supermarkets could be faced with difficult decisions in a few months as the drought forces food prices higher, according to Forbes.

Laura Seitz, Deseret News

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Supermarkets could be faced with difficult decisions in a few months as the drought forces food prices higher, according to Forbes.

Privately owned supermarkets and grocers in the U.S. have seen their profits slowly shrink since 2010, according to data from a financial information company called Sageworks. Wholesale food prices increased by 0.5 percent during the month of July, the federal government said earlier this week.

"These stores have historically had slim margins and have relied on sales volume to cover costs stemming from their large stores and huge inventories," Sageworks analyst Libby Bierman, told Forbes. "If inventory costs creep higher thanks to wholesale food prices, then supermarkets will have to increase their costs to consumers or face unprofitability."

On average, profit margins for private grocers and supermarkets in this industry have dropped from almost 2 percent in 2010, to approximately 1 percent over the past 12 months, according to financial statement analysis via Forbes.

EMAIL: bbullock@desnews.com

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