USDA officials, however, are predicting a less dramatic impact on food prices. According to USDA estimates, only 14.6 cents of every grocery dollar goes to farmers or ranchers. Labor and processing make up a much larger part of the cost of food, points out Professor Gardner, adding that “the impact of the drought won’t really change those costs.”
The USDA calculates that overall prices rise one percent for every 50 percent increase in the price of corn. On Sunday, Agriculture Secretary Tom Vilsack appeared on CNN’s “State of the Union” to say it’s too soon to see the crop losses now being witnessed across the nation’s bread basket translate into sticker shock at the grocery store.
While commodity prices will likely increase, he said, “it will have a marginal impact on food prices.” He added that energy prices drive up food prices more significantly.
“The prices and the impact of a drought probably will not likely be seen in the grocery aisles until later next year, 2013,” he said.
"My sources in the Midwest tell me that the drought is actually worse than indicated in USDA's recent yield estimates,” he says via e-mail. He says the USDA estimates of a 12 percent decline in corn yields were from “overly optimistic initial yield estimates.” He suggests that farmers will more than likely see close to another 10 percent decline in yield.