Corn, soybean prices shoot up as drought worsens

Corn and soybean prices have been rocketing higher as farmers hope for rain. Click chart for more commodity prices.

NEW YORK (CNNMoney) -- As the Midwest continues to suffer through its worst drought in more than 50 years and corn prices near record highs, sixth generation farmer Pam Johnson stares out her window, praying for rain.

"We went into this year having planted more acres than we had planted in many years, expecting to raise a bumper crops," said Johnson, who farms with her husband, two sons and their families in Floyd, Iowa. "The planting conditions were great, and our corn came out picket-fence perfect. But now we have no idea how many bushels we'll be able to harvest this fall."

While her farm typically enjoys between 6 inches to 10 inches of rain in June and July, this year has been dismal, with only a little more than an inch of rain in June and less than half an inch so far in July.

Dry, scorching heat has pushed up corn prices more than 50% over the past five weeks.

"Everyday we have dryness, extreme heat above 100 degrees, and wind. That's a deadly combination for our crops," Johnson said. "But we're still hopeful. If it rains, we'd be so thankful. Our corn crop has taken a big hit on its potential, but the soybeans could still rally."

As the widespread drought wreaks havoc on crops, grain prices have shot to record highs.

Corn for December delivery, the most active contract, rose as high as $7.960 per bushel Friday, just shy of the record $7.998 hit last June. But corn for September delivery, the front-month contract, rose to match its all-time high of $8.166 per bushel reached a day earlier.

Meanwhile, soybean prices, which are up nearly 25% since early June, continued to rise Friday. Soybeans for November delivery, the most active contract, rose more than 2% to $16.902 a bushel, topping the record set on Thursday.

Secretary of Agriculture Tom Vilsack said earlier this week that 78% of this year's corn crop is now in an area designated as drought impacted, while 77% of the soybean crop is being threatened.

"This obviously will have an impact on the yields," said Vilsack, during a White House press briefing. "Right now, we have indicated yields will be down about 20 bushels to the acre for corn and about 3 bushels to the acre for beans. That may be adjusted upward or downward as weather conditions dictate."

As long as the drought continues, experts warn that shoppers could be facing higher prices at the grocery store.

On average, food prices typically rise 1% overall for every 50% jump in corn prices, said Richard Volpe, an economist for the Economic Research Service of the U.S. Department of Agriculture, but fresh protein and dairy products are impacted more severely.

In fact, the price of beef, pork and poultry could jump as high as 10% if the drought lingers, said Michael Miller, senior vice president of global research for the National Cattlemen's Beef Association.

The true extent of the increases won't be known until the crops are harvested later this year, and prices won't jump overnight of course. In fact, consumers will likely face the trickle down effect toward the end of this year, and into the start of 2013, Miller added.

And prices for packaged products, like a box of corn flakes, will remain relatively steady, according to the USDA's Economic Research Service, since prices for those types of foods are more heavily impacted by packaging, processing, advertising, and transportation.