reports that corn futures are up 44% and soybean futures are up 26% since June 1. As a result, "farmers are expected to pass at least part of that cost increase on to their customers, eventually leading to higher prices on grocery-store shelves." The exact amount of food inflation and its effect on consumers is unknown, and will depend on a variety of factors, including lower energy prices, which could offset the higher crop prices. Price increases will roll out at different times and in different ways: for example, to stave off the inevitable rise in feed prices, cattle ranchers have begun slaughtering cattle at a faster pace, which will likely lead to a temporary boost in beef production and keep the price stabilized, if only for a short while. Chicken and turkey prices will show the first price increases, as they grow more quickly than larger animals, and 70% of chicken feed is corn. The Wall Street Journal cites peanut butter as a case study in how the situation could play out in the coming months:
Last summer, a drought in Southern states devastated the peanut crop, and by September, around harvest time, government data showed double-digit year-over-year retail price increases in percentage terms for the popular spread. By December, prices were up 27% and, most recently, 39% last month.The most alarming statistic in the report, although not the most surprising, is that poorer Americans will feel the impact of higher food prices the most: "For Americans in the bottom 20% of income, food typically takes up more than a quarter of household income, compared with about 10% for wealthier Americans." A gallon of whole milk, which cost $3.36 last month, is projected to be up to $3.50 to $3.75 by the end of the year, and even higher in the new year.
Read More: Price Check: Drought May Hit Grocery Tabs at The Wall Street JournalRelated: Even Dairy Farming Has a One Percent (Image: Bunpot/Shutterstock)