Food prices heading higher

There is a source of inflation that has been growing that will effect every person in this country: Higher food prices. Recently, prices for several key agricultural commodities surged higher in a way not seen since last summer. Wet weather in the spring, and cooler temperature since, have slowed development of both corn and soybean crops.

By Anthony Mirhaydari
August 26, 2013
MSN Money

In recent weeks, I've been talking a lot about the specter of inflation. Most of this has to with the Federal Reserve, the banking system, and other high-finance issues. But there's another source of inflation bubbling up that'll hit every man, woman, and child in this country: Higher food prices.

On Monday, prices for several key agricultural commodities surged higher in a way not seen since last summer. And in the case of soybeans, you have to go back to 2010 for a similar one-day price gain. And the evidence suggests the price rise is just getting started.

The reason is that supply is under pressure. The market had been pricing in a bumper crop this year. But a recent tour of the upper Midwest by analysts at Societe Generale revealed that while on the surface things appear healthy, once they walked into the fields a "decidedly different story began to unfold."

Wet weather earlier in the spring, and cooler temperatures since then, have slowed development of both corn and soybean crops by about two to three weeks.

That's opened two potential risks. One, conditions have been dry in Indiana, Illinois, and Iowa, stressing developing plants and raising the risk of what's known as kernel abortion and lowering crop yields. Two, there is a risk that an early frost could damage still growing crops in the coming weeks.

Adding to the supply concerns has been a bad frost in Brazil, which has damaged the wheat crop there.

In my recent inflation slideshow, food prices were one of the main sources of price pain for average families. This suggests more pain is coming.

food prices

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