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Forbes: The Drought's Impact on Food Prices

Packaged foods

It’s well known that processed foods can contain a number of corn products and by-products, including high-fructose corn syrup. It’s no wonder then that this has incited fear that our favorite packaged products will shoot up in price.

But shoppers need not worry. The more food is processed, the less susceptible it is to the ebbs and flows of commodity prices, as these ingredients comprise such a tiny percentage of the costs that go into packaged items. According to the USDA, the “farm share” of a typical $1 food purchase is 14.1 cents. The remaining 85.9 cents is accrued to industries in post-farm activities such as processing, packaging, transport, advertising and sales. Even if food companies face higher costs, their first reaction is almost never to increase the retail price of their goods. Instead they work on reducing costs in other ways such as reformulating their packaging to be less expensive, or downsizing their product by putting less in a container but still charging the same. “While a consumer might not notice if their regular $8 can of coffee weighs a little less, they will definitely notice if $8 becomes $10 and they aren’t getting any more for the extra money,” explains William Snell, of the Department of Agricultural Economics, University of Kentucky.

(Photo by Getty Images)

More from Forbes:
Where You Might Not Shop In 2012
America’s Most Overpriced Cities
The Best Cities For Bargain Shopping

The opinions expressed are solely those of the author and do not necessarily reflect the views of Comcast.

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