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ISU Experts say Food Price Hikes Likely will be Delayed

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CEDAR RAPIDS, Iowa -- The drought that is driving up corn prices is expected to be felt by consumers in coming months in the form of higher prices at the supermarket.

Corn prices have soared throughout the summer due to the historic drought that has withered much of the nation's prime farmland, which has driven up feed costs for livestock and poultry producers.

Hay prices also have soared from $75 a ton in the spring to more than $250 a ton at auctions in Dyersville and Fort Atkinson.

Chad Hart, Iowa State University Extension and Outreach grain markets specialist and associate professor of economics, contends that today's higher commodity prices will not show up in prices paid by consumers until six to nine months from now.

"It takes time for the high corn and soybean prices that we see today to interact with what we pay at the grocery store," Hart said. "The food prices that we see right now are reflecting commodity prices from a few months ago."

Most of that delay stems from the time it takes producers to raise animals. Many of the cattle, hogs and poultry that are fed corn sold at today's prices won't be ready for slaughter until 2013.

The U.S. Department of Agriculture is forecasting that overall grocery prices will rise between 3 percent and 4 percent next year relative to this year.

Beef and veal prices are expected to rise between 4 percent and 5 percent, and pork is expected to increase between 2.5 percent and 3.5 percent, according to the USDA food price index forecast.

Consumers likely will see small, incremental increases in the price of choice cuts of beef over the next six to nine months, according to Shane Ellis, a field specialist for the Iowa Beef Center at ISU.

Retailers "don't want to sticker-shock customers with huge price increases," Ellis said. "They will keep it consistent and gradual."

Ellis said choice cuts of beef have been selling for just over $5 per pound in recent months. He said that could peak around $5.50 in 2013.

The price of corn affects more that meat prices on the grocery shelf. Corn is used to manufacture high fructose corn syrup and corn oil that is used in a variety of food products.

That likely will increase the price of a wide assortment of processed foods in coming months.

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