When grain prices increase (corn, soybeans and wheat), do food prices increase?
Not always. Grain markets are traded each weekday and can fluctuate greatly. Consumers will not see daily food price fluctuations based on these markets. Food price increases depend on many factors (such as fuel costs), beyond grain commodity prices. Additionally, during a drought year like 2012 when many ranchers and farmers were evaluating feed costs for farm animals – typically corn or soybeans, depending on the species – as well as grasses and forages affected by drought conditions – many looked to reduce or liquidate their herd size or reduce their poultry production. Costs to raise farm animals are high and may not be economically viable when feed costs rise. With this liquidation of farm animals, the surplus of meat may actually lower the price in stores initially. While this may be temporary until that surplus has leveled out, consumers may actually pay less for meat for a given period of time. Following this price reduction, prices may increase due to low supplies.
Some farm animal producers, like cattle ranchers, may look to alternate feed sources by locally recycling by-products like beets, potatoes, citrus and other local feedstuffs that may help them survive times of high grain feed and forage prices.