Corn prices are nearing the record highs of last summer as the U.S. Midwest suffers its worst drought since 1956. Shoppers should expect higher grocery bills, because corn is used in three-quarters of supermarket products.
But don’t panic. Overall cost hikes are likely to be modest.
“A 50% increase in the price of corn tends to raise total shopping bills by about 1%,” says Ricky Volpe, a research economist with the U.S. Department of Agriculture. Corn’s price has jumped 45% this summer. Of course, even a modest increase to shopping bills is unwelcome news for households on tight budgets.
Strange as it may seem, farm crops aren’t nearly the largest component of food prices. In 2008, just 15.8 cents of each dollar shoppers spent on food went to farms, according to the USDA. The rest paid for labor, packaging, transportation, advertising and more.