"The genie's out of the bottle when it comes to food inflation," said Michael Swanson, an agricultural economist at Wells Fargo & Co.
Corn prices over the past year have reached near-record highs thanks to growing production of ethanol, which is made from the grain, as well as rising demand. Corn futures closed at $3.29 a bushel yesterday on the Chicago Board of Trade, up from about $2.89 a bushel last year.
Prices have softened some because of this year's bumper crop. U.S. farmers are in the process of harvesting 13.1 billion bushels of corn, up 24% since last year and the largest crop since 1933, says the Agriculture Department. But it's unlikely that the crop will send prices down to levels seen a year ago.
The higher grain costs have trickled down throughout production lines. Mr. Bond cited the price of corn, the predominant feed for cattle, as a problem for Tyson's beef business. Prices for live fed cattle averaged about $93 per hundred-weight through August, versus about $85 last year, said Kevin Good, senior analyst at Cattle-Fax, a cattle marketing information firm based in Englewood, Colo.
Consumers can expect to pay as high as 4.5% more for groceries and restaurant meals this year over last, according to the Agriculture Department. That means shoppers who spent $100 on groceries during an average shopping trip last year can expect to pay as much as $104.50 this year for the same groceries.
But remember -- all that matters is core inflation.