Grocery prices rising?

By Jennifer Warnick - bio | email
Posted by Terry Alexander - email

RICHMOND, VA (WWBT) - Brace yourselves. In the next year, you may be surprised by what you have to pay for food. Agricultural commodity prices are rising and what's good for one crop might not be for another.

Drought and floods ruined many of the wheat crops, creating a ripple effect across the farming industry. It's Jonah Bowles' job to track these trends. He is an Agricultural Economist at the Va. Farm Bureau.

"Grain prices are going higher now because we have lowered our production estimates for this year, those higher prices are directly impacting the livestock industry that uses those grains for feeds," said Bowles.

That means possible prices hikes on beef and dairy products.

"But they have such a little impact on our overall food prices that we pay," he said.

When you start adding in fuel and labor costs and a staggering world economy, manufacturers can't take that kind of hit to their bottom line.

"When input costs go up the tendency is to increase the cost of the final good," Bowles explained.

The 2008 biodiesel boom skyrocketed the demand for corn and its price went up. With so much acreage devoted to corn, farmers grew less of other crops. The prices of those other crops went up to make up for smaller yields.

"So we are now under a new supply-demand scenario," Bowles said.

Some manufacturers found they could make the packages smaller to avoid raising prices.

"It doesn't take a very large change in size to cover added costs," Bowles stated.

At this point prices have leveled out, but they did so at a slightly higher rate. So any increase on the front end of production could be passed on to you, the consumer.

Copyright 2010 WWBT NBC12. All rights reserved.