4 Rising Food Costs

Prices are on the rise in grocery stores across the country. You may not notice the changes right away; that loaf of bread may be only a dime more expensive than it was last year. The soda you buy may be the same price but it's now 1.5 liters instead of two. Many of the major cereal manufacturers, such as General Mills, have warned of impending price increases.

Why Are Grocery Prices Going Up?

While almost every grocery store aisle is affected by rising prices, a large part of the reason all comes down to two commodities: wheat and corn. Both food staples have been hit hard for the past two years - a combination of climate change, natural disasters and crop disease. Russia has experienced severe drought for the past two years and had stopped exporting wheat altogether to ensure enough of a domestic supply. They have resumed limited exports as of July 2011 but supplies are still short. A disease called wheat rust UG99 has wiped out crops across Africa and is spreading to other wheat-producing countries at a rapid pace.

There have been many corn crop failures across North America also, but the real culprit for corn is that it is being used to make ethanol, an arguably sustainable fuel. Hundreds of thousands of acres that once grew corn for people now grow it to power our cars.

At first glance, it may seem like these increases will only mean you'll be paying more for a few grocery items like bread and popcorn, but wheat and corn are included in the vast majority of foods that you may eat every day. Here are four areas where you will see rising prices.

1. Cereals, Breads and Pasta Products

Most processed cereals are made from corn and these will be hit hard by price increases in the next year. The commodity price of corn has nearly doubled since 2010 and is rising again due to the massive drought Texas is facing. Breads, rolls, cakes and cookies will all rise in price from the steep jump in the price of wheat. According to food manufacturers, the industry has been holding back from increasing retail prices but cannot absorb the costs any longer.

2. Sweets

Most processed "sweets," from soda to cookies to jam, are made with high fructose corn syrup. The lack of corn supply is causing prices in these areas to steadily rise. Watch out for shrinking packages, as well. Many companies will keep the same price point but drop the amount you get.

3. Beef, Pork and Chicken

Almost all industrialized meats fed on corn, mainly because it was the cheapest feed available. As the price of corn rises, there are still no cheaper alternatives, so the price of meat rises because of the higher input price.

4. Cat and Dog Food

Pet food contains grains in one of two ways: processed dry food often contains corn as one of its primary ingredients and canned food contains meat chunks or wheat-based thickeners. It's not just the cost of human food that will go up.

The Bottom Line

You might not be able to do anything directly about rising grain prices, but you can shop smarter. Look for loss leader sales on those groceries that you purchase regularly. Make more of your own food directly from raw ingredients, such as cookies and rolls. Pet food can be stored for six months to a year so stock up when you can find a good price. Paying more attention to prices in the grocery store will help you stretch your food budget the farthest.