Why food prices are set to soar

distressed cornSue Ogrocki/AP/Press Association Images

If you thought the soaring cost of living couldn't get any worse, then think again - because the price of food is set to soar this year. Groceries have brought their fair share of pain already, as price inflation has hit everything in your shopping basket.

However, it seems that we haven't seen anything yet.

The crisis

The cause of the latest crisis is a drought in the US Midwest. Officials in America have confirmed that more than 75% of growing land has been affected by the dry conditions, which is threatening to decimate the harvest. It is thought to be the worst drought in the region for 50 years. US agricultural secretary Tom Vilsack said: "I get on my knees every day, and I'm saying an extra prayer right now. If I had a rain prayer or a rain dance I could do, I would do it."
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The effects are already being felt in the market - soya bean prices are up 30% since June to an all-time high, corn prices are up 40% to a new record and wheat prices have risen 50%.

Price of shopping

The US is a major producer of corn, soybeans and wheat, which are staples in a variety of foods. This will affect those things you would expect - such as bread. It will also hit the huge variety of processed foods that use soybean meal or oil. The effect of these things will trickle through into supermarket pricing in the next few months.

But one of the most devastating effects will be from the fact that corn is a major animal feed product, which means that the cost of meat and meat products will be under pressure too. This will have an odd effect. In the short-term the cost of meat will actually fall - as farmers take weaker animals to slaughter earlier because they are not economic to feed. However, within six months, there will be a major shortage of meat, and you can expect prices to rise again

The good news is that while this is unpleasant and painful, things are not as bad as 2008, when the high price of food prompted riots around the world. Prices are high, and set to go higher, but they are quite a way off these peaks, and are not expected to reach them this summer.

The bad news, is, of course, that the price of food tends to rise quickly and fall slowly. We are only just seeing prices on the supermarket shelves fall back after the 2008 peaks. So it's particulately unwelcome news that we're hardly going to have chance to pause for breath before prices start rising again.

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Why food prices are set to soar

This takes time, but once you know the cost of a phone call, putting the dryer on, or a bag of potatoes, it enables you to judge far better how much you can afford to consume.

Once you know the base price, you are in a position to keep your eyes open for a better offer. If you see a discount you can judge for yourself whether it actually constitutes a bargain. For bigger things like utilities it enables you to do a proper price comparison and see if you can cut your bills.

Don't just assume that the premium range is better, try the every-day brand, or even the basic version and see if you spot the difference. Likewise, consider trading down your supermarket from one of the big players to local markets or discounters like Aldi.

If you plan what you buy to match what you actually cook and eat then not only will you be able to budget far more effectively, but you'll also waste much less and find your money goes further without you having to try.

If you can't think of a way to get your meat for less, consider a vegetarian day once a week. If you can't find petrol any cheaper, then work on making your driving as efficient as possible. The more you can think of clever alternatives the less you will have to make painful cuts to make ends meet.

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