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What a Spike in Corn Prices Will Cost You at the Grocery Store


With this summer's rising temperatures come rising costs at the supermarket -- but not where you might think.

MINYANVILLE ORIGINAL Earlier this month, record-breaking temperatures led the United States Department of Agriculture to declare over 1,000 counties across 26 states natural-disaster areas. This area contains nearly one-third of the counties in the country, making it the USDA's largest declared disaster area to date. Experts have described this summer's drought as the worst in a generation.

The hot weather has been particularly devastating for the Southwest and Southeast, including the southern and eastern sections of the grain belt, with corn futures soaring by nearly 50% since May. According to the USDA, almost 40% of corn is in poor or very poor condition. Around this time last year, that figure was closer to 11%.

The effect? Your grocery bill might start to feel the heat.

Corn is a staple in nearly all supermarket staples. The infamous high-fructose corn syrup, for example, sweetens everything from Coca Cola (KO) and Pepsi (PEP) to Heinz (HNZ) ketchup to Kellogg's (K) Frosted Flakes cereal. Corn is used in the production of ethanol, various cooking oils, and many whiskeys. Most significantly, corn is the primary feed for livestock such as cattle, pigs, and chickens.

Luckily for consumers, packaged foods shouldn't experience a severe price hike. Food companies' concerns over scaring consumers away in the current weak economy, in combination with hedging strategies targeted at absorbing high corn costs, should keep companies from raising prices -- in the short term, at least.

Meat prices, however, are another story, as rising feed costs will directly impact prices at the market. As feed gets more and more expensive, animals will be sent to slaughter younger and smaller than they normally would be. While this maintains current supply, it will create a deficit later in the year. As such, we'll likely start to see the effects in the next three to eight months.
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