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How rising grocery prices change what we eat

Don't be surprised if you see fewer steaks on the backyard barbecue this summer.

Economists are expecting grocery prices to rise modestly in 2014, following a year in which grocery bills barely budged. That could lead to sticker shock—especially in the meat aisle, where beef prices have reached record highs—and cause shoppers to trade out pricier foods for less expensive ones.

Economists are already starting to see signs of those tradeoffs, especially when it comes to red meat.

Alice Korey, right, serves dinner with her daughter, Elana, 10, who helped her cook, and her son Luke, 9, at their home in Katy, Texas, March 27, 2014.
Erin Trieb | NBC News
Alice Korey, right, serves dinner with her daughter, Elana, 10, who helped her cook, and her son Luke, 9, at their home in Katy, Texas, March 27, 2014.

"It does seem like consumers are making the choice to get the ground turkey instead of ground beef, or the filet of salmon instead of the filet of beef," said Richard Volpe, a research economist with the U.S. Department of Agriculture.

That's exactly what Alice Korey started doing recently, when she realized that her favorite, high-end beef was getting too pricey, and another favorite protein source, buffalo, was also too expensive.

"Now what I'm doing is buying turkey, because turkey is cheaper than beef," said Korey, a stay-at-home mom with three kids.

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Korey said steaks also will be a treat this summer because of higher prices. In general, she said, she's taken to using coupons, looking for sales and finding little ways to cut back on the family grocery bill.

Alice Korey eats dinner with her kids Alex, 12, left, Elana and Luke
Erin Trieb | NBC News
Alice Korey eats dinner with her kids Alex, 12, left, Elana and Luke

The USDA is predicting that the overall prices for food we eat at home will rise by 2.5 percent to 3.5 percent this year. That compares with a rise of less than 1 percent in 2013 and a 2.5 percent increase in 2012.

Already, shoppers are probably seeing some of those price increases, particularly when it comes to their favorite proteins. The price of beef and veal was up 5.4 percent in February, compared to a year earlier, and fish and seafood prices rose by 7.2 percent year over year, according to the USDA. Egg prices also were up sharply.

Consumers don't necessarily give up on a favorite food completely when prices go up, said Ryland Maltsbarger, an economist with IHS Agriculture. Instead, he said, some shoppers who really want a steak might first look to see if there is a cheaper steak available.

If that's still too pricey, a beef lover might start making other tradeoffs, like serving hamburgers twice a week instead of steak one night and hamburgers another, or buying smaller steaks.

When food prices go up, low-income households are hit hardest because they're forced to spend more of their disposable income on food. But economists say most families, even those with more financial flexibility, often make tradeoffs to keep their grocery bill from getting out of hand or to counterbalance higher prices for things like gas or medical expenses.

Korey, 42, of Katy, Texas, said she and her husband, a salesman in the oil and gas industry, want to provide what they consider a normal family life for their kids. That means buying decent clothes and shoes and being able to fund reasonable activities, like recreational baseball or a band trip.

But those things add up, and Korey said she realized that if she wanted to keep the family budget intact—and continue to put aside a bit for her kids' college funds—she needed to start paying closer attention to rising food prices.

"When you want to be able to provide those things for your kids, it's like, "Why do I want to pay $7 for orange juice?" she said.

Even at high-end grocers such as Whole Foods, customers seem to be mindful of price shifts. The company said in an e-mail that customers shopping for proteins have lately been gravitating toward ground beef, chicken and lunch meats.

The price of beef is up following droughts that have hurt ranchers, leading to less beef supply. Michele Murray, senior executive director for integrated communications with the National Cattlemen's Beef Association, said it's hard to predict when more beef will be available.

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In response to higher prices, Murray said the trade group is seeing consumers buy more beef in bulk, choose more modestly priced ground beef and decrease portion sizes.

The amount of beef people are eating has decreased because there is less beef available, she said, but the trade group does not think interest in eating beef has waned.

Economists are predicting that prices for other food items will increase modestly this year as well. But so far at least, they aren't expecting an extremely dry winter in California to lead to vastly higher prices for fruits and vegetables, which are more easily obtained from overseas than items such as beef. That should be good news for produce lovers on a budget.

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"We'll see some impacts from the California drought, but it will probably be on specific items, and it will be mitigated by imports," Maltsbarger said.

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