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Rumblings from a world increasingly hungry for oil and grain caused a 5.3% jump in food prices during 2007 — the largest increase in almost two decades. This year, prices are expected to grow by at least that much.

Among the commodities putting the biggest pinch on consumer’s grocery budgets is wheat, which hit a record high of $24 this week on the Minneapolis Grain Exchange, a 480% increase from this time last year. Soybean prices are 77% higher over that same time period; corn is up 23%.

“There is a global increase in demand for food commodities, driven by a rapidly growing middle class in India, China and other developing countries seeking protein,” explains Jack W. Plunkett, CEO of Plunkett Research. “Growth in demand is outstripping growth in supply.” Hardship has further contributed to the scarcity of certain foods. A drought last year in Australia reduced the availability of milk, while poor wheat harvests in several countries hurt world-wide supply. And beef prices have jumped since the U.S. enacted its largest ever beef recall — 143 million pounds — earlier this year.

Skyrocketing oil prices, which regularly top $100 a barrel these days, have also added to the expense of producing, packaging and transporting foods. “Think of it as paying more per calorie burned,” says Plunkett.

The resulting higher costs are swiftly passed down the production food chain to grocery store shelves. “It’s like when the price of oil goes up, and you see a difference at the pump in the next day or two,” says Al Ferrara, national director for consulting firm BDO Seidman’s retail and consumer product division. Constantly produced fresh items like milk (up 19% in 2007), eggs (up 33%) and bread (up 11%) are more apt to reflect changes on a nearly daily basis.

With a little legwork, savvy shoppers can keep their grocery bills at pre-2007 levels — if not lower. Here’s how:

Stockpile
Most items are discounted just once during a 10-to-12-week sales cycle, says Teri Gault, founder of shopping site The Grocery Game. Seasonal items (think barbecue sauce in summer, soup in winter) show up every one to two weeks, while highly-competitive categories (cereal, soft drinks) cycle in every three to four. While it’s not necessary to buy, say, eight jars of peanut butter, it’s better to buy one jar while your favorite brand is on sale now than one at full price after you run out in two weeks.

Explore the store
Saving at the supermarket requires more effort than a quick dash and grab. Some of the best deals aren’t obvious unless you take the time to price compare, says Phil Lempert, founder of Supermarket Guru. Cheese, for example, can be purchased from the cheese counter, the deli and the dairy case. “New York cheddar is New York cheddar no matter where you buy it,” says Lempert. “But the price may be cheaper in one section than in another.”

Keep an eye out, too, for sales. There are twice as many unadvertised sale items in the store as there are in the weekly circular. But be cautious. The longer you spend in stores, the more susceptible you are to sneaky supermarket tricks that entice you to spend more. Make a list, and stick to it.

Try store brands
It’s unlikely you’ll notice a quality difference between ShopRite’s frozen chopped broccoli and Birds Eye’s, says Lisa Lee Freeman, editor in chief of Consumer Reports’ ShopSmart magazine. In fact, most store labels are produced by the same manufacturers that make the brands you know and love. (The maker of Birds’ Eye frozen vegetables, for example, also makes store-label frozen veggies.) But there’s a big difference in price. A 14-ounce package of the store-brand broccoli is 44% cheaper than the brand name. Of course, some store-label products make better deals than others.

Buy “must go” foods
“Ask the staff at your supermarket what time they mark items down,” says Tawra Kellam, founder of frugal living web site Living on a Dime. Stores routinely discount dairy, baked goods, produce and meat by 50% or more as these items approach their sell-by date or become less attractive (think bruised apples or crushed bread). Make no mistake: These items are perfectly safe to eat, even several days after purchase. “You’re not buying old food,” she says. “There’s a big difference between the sell-by date — which is what the stores are required to go by — and the expiration date.”

Shop on Sundays
It’s the best day to buy groceries. Armed with the fresh batch of coupons from your Sunday newspaper and the weekly sales circular, you can maximize your savings. Consumers who combined the two reported saving an average $678 annually, according to a recent Consumer Reports survey.

Think outside the supermarket
Supermarkets aren’t the only place to go for groceries. Here’s where to look:

• Drugstores and pharmacies for milk, over-the-counter medications and personal-care items. “At supermarkets, there’s no coupons for milk, and there are rarely sales,” says Gault. “Drugstores are hoping you’ll grab some milk, and on your way to the register, some higher-priced stuff, too.” At CVS in San Francisco, a gallon of skim milk is $3.99; at Safeway, it’s $4.59.
• Superstores for snacks, cereals and cleaning supplies. The added bonus: Target, Wal-Mart and Kmart are likely to accept competitor’s coupons and match sale prices.
• Online Amazon.com is gaining traction as a grocer, thanks to its free shipping policy and discount prices on bulk quantities, says Lempert. At the Hy-Vee grocery chain, a box of 100-calorie Oreo packs is $2.89. At Amazon.com, a bulk pack of six is $16.25 — a 6% discount.
• Warehouse clubs for alcohol, prescription medications and pantry staples. You can easily recoup the annual membership fee, says Freeman.
• Discount grocers for anything. Aldi and Save-A-Lot primarily sell products bearing their own label, instead of brand names. There’s less selection, says Kellam, but prices are usually at least 20% lower than at the supermarket.
• Surplus stores for dry goods. Chains like Amelia’s, SharpShopper and Grocery Outlet cut prices by up to 70% on damaged, near-expired and expired food obtained directly from the manufacturer. The deals are excellent, but you’ll have to be extremely cautious, says Lempert. “I am not a big proponent of going past the expiration date,” he says. Check for quality before you buy.

Check unit prices
Buying the bigger size isn’t always the best deal. The Federal Trade Commission found that bigger sizes of tuna fish, peanut butter, ketchup, coffee and frozen orange juice were often pricier per unit than smaller counterparts. Crunch the numbers before you buy.

Become a coupon connoisseur
Take your Sunday morning coupon clipping one step further. Join your supermarket’s loyalty club because many offer bonus sales. Grocery chain Fry’s, for example, automatically doubles the value of its members’ manufacturers’ coupons. Also check online coupon sites — because technology limits you to one print-out coupon per computer (as opposed to buying five weekend papers) manufacturers are often more generous with the coupon amounts. Try The Grocery Game, Coupons.com and Red Plum.

Story from: SmartMoney.com