Weather
Recent flooding in the Midwest and Corn Belt has prevented farmers from planting soybeans and damaged the corn crop, which had recently been planted. Analysts have estimated that there may be a shortfall of 15% or more in grain produced this year compared to last year due to the flooding.
The bad weather hasn't been limited to the U.S. Poor weather has reduced overall global food production from Canada, the European Union and Eastern Europe over the last couple of years. A drought has resulted in a major Australian wheat decline. This has tightened world food stocks, which has contributed to rising food prices.
Speculation
Speculation's role in increased food prices is hotly debated, but it appears that investors have taken an interest in food prices and are playing a larger role in the commodity markets.
As food supplies tighten, there is a good chance that speculators will increase in the hope of making a quick buck, further increasing food prices.
Ethanol Production
With the rise of oil prices, U.S. ethanol production has greatly increased. It's expected that over 30% of the U.S. corn crop will go toward ethanol production this year.
With such a large portion of the corn crop going to ethanol production, there will be increased competition for the food in other uses, such as feed for cattle and dairy cows, manufactured foods like cereals and foods sweetened with corn syrup.
All indications are that food will get more expensive and you should be preparing for these coming increases. While cutting food prices isn't necessarily difficult, it does take practice and time to learn to take advantage of the money saving tricks out there.
