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It seems chicken feed is worth a lot these days. And rapid local population growth mixed with a global economy equals higher milk prices.

The Arizona Daily Star's 26th annual grocery-price survey found that the average price of 1 pound of boneless, skinless chicken breasts rose by 49 percent over last year, due partly to rising corn costs as ethanol becomes a popular fossil-fuel replacement.

Chicken feed and ethanol are both made from corn.

Similarly, the items in the dairy category — milk, cream cheese, butter and cheese slices — account for almost a third of the overall basket-price increase from last year to this year.

The average basket price far outpaced inflation, jumping from $101.17 last year to $111.08 this year — a $9.91 difference, $3.17 of which was dairy.

Wal-Mart Supercenter and its baby brother, Wal-Mart Neighborhood Market, took first and second places once again, respectively, as the grocery stores with the lowest overall basket costs.

In fact, though total prices were up slightly from last year, the only change in ranking order was that Bashas' fell to second-to-last place, allowing Albertsons to claim the position Bashas' previously held.

Food City was left out of this year's ranking because the store did not carry six of the 32 commonly used items on the grocery list, the same as last year's.

The survey was conducted Sept. 12.

"Milk prices have been the single-biggest mover at the retail level this year," said Ephraim Leibtag, an economist with the U.S. Department of Agriculture's Economic Research Service.

The price surge began in the spring and "started to leak its way over to the rest of the dairy case," he said.

A big drought in Australia — a major milk producer — and a European cutback in subsidies to dairy farmers resulted in lower world milk production that put a strain on U.S. sources, Leibtag said.

Chicken prices, too, have been on the rise across the country, he said, but local chicken prices seem to be outpacing the national increase.

That's because there is no commercial poultry production in Arizona, said Ed Hermes, spokesman for the Arizona Department of Agriculture.

"We don't have any producers, so it has to be shipped," Hermes said.

This year's high gas prices and high feed prices seem to have combined to push up our poultry prices, he said.

He added that the population explosion in Arizona has also contributed to the higher milk prices. Leibtag said we've seen the biggest part of the milk-price increase.

"I don't think we're going to see dramatic drops in the prices," but it should level out soon, he said.

2007 grocery survey results

Cream cheese, Philadelphia regular, 8 0z.

$1.85

av. price 2006*

$2.47

av. price 2007

62¢

increase

Cheese, Kraft American, singles, 16 slices

$3.05

av. price 2006

$3.83

av. price 2007

78¢

increase

Butter, one pound

$2.79

av. price 2006

$3.52

av. price 2007

73¢

increase

$2.04

av. price 2006

$3.09

av. price 2007

$1.05

increase

Milk, skim, one gallon