Graphic: MGN Online

Corn prices already are high and a drop in supply should keep them rising. Combine that with the huge demand for corn-based ethanol fuel—and higher energy costs for transporting food—and consumers are likely to see their food bills going up and up.

Farmers are now expected to plant 86 million acres of corn this year, the Department of Agriculture predicted March 31, down 8 percent from last year, which was the highest since World War II.

Corn is almost everywhere you look in the U.S. food supply. Poultry, beef and pork companies use it to feed their animals. High fructose corn syrup is used in soft drinks and many other foods, including lunch meats and salad dressings. Corn is often an ingredient in breads, peanut butter, oatmeal and potato chips.

Corn components are even used in many grocery store items that aren’t edible—including disposable diapers and dry cell batteries.

When the corn that goes into those products goes up in price, increases eventually can be passed along to consumers.

And corn prices have skyrocketed in recent years, almost tripling since 2005.

Corn began its latest surge in early 2007, rising from just over $3 per bushel to record prices above $5 per bushel today. If prices hold steady or rise, the average yearly price per bushel in 2008 will be the highest ever, according to USDA statistics.

Corn climbed higher following the release of the USDA report, with the most-active contract briefly hitting an all-time record of $5.88 a bushel on the Chicago Board of Trade before settling at $5.6725 a bushel, still up 6.75 cents.

They have been pushed along by the burgeoning ethanol industry, which turns the crop into fuel, and by rising worldwide demand for food.

“People who are working families, just barely making it and already paying higher prices for gas and home heating oil are going to be shot in the pocket by higher food prices,” said Carol Tucker-Foreman of the Consumer Federation of America.

Richard Lobb of the National Chicken Council said recent increases in the cost of corn feed have been absorbed by larger chicken companies, such as Pilgrim’s Pride Corp. or Tyson Foods Inc., that provide feed to poultry farmers. But that could change.

“At a certain point we have to readjust and get back to square one,” Mr. Lobb said. “The only people who have money ultimately are consumers.”

Ms. Tucker-Forman of the Consumer Federation of America and Scott Faber of the Grocery Manufacturers Association both say rising food prices could be stemmed if Congress would pull back subsidies for the ethanol industry.

The number of ethanol plants has almost tripled since 1999 and more are being built, according to the Renewable Fuels Association. Such plants could gobble up more than a quarter of the country’s corn crop.

“Food prices being driven by the food-to-fuel mandates will most significantly affect the working poor,” Mr. Faber said.

Matt Hartwig of the Renewable Fuels Association said the higher prices can’t be blamed only on the ethanol industry.

“There are a host of factors contributing to higher corn prices—surging global demand to feed people and livestock, a weak dollar encouraging exports and rampant speculation— that have a far greater impact than America’s ethanol industry,” he said.

According to the Agriculture Department, corn planting is expected to remain at historically high levels but may dip this year because of the high expense of growing corn and favorable prices for other crops, such as soybeans.

As many farmers have switched, soybean planting is expected to be up 18 percent this year, at almost 75 million acres. Farmers are also expected to plant more wheat this year, which could lower retail prices for pasta and bread.

Soybeans for May delivery fell below the 70-cent limit March 31 on the Chicago Board of Trade, settling at $11.9725 a bushel. Still, soybean prices are up 45 percent since March 2007.

The Department of Agriculture report is based on sample surveys of 86,000 farm operators in the first two weeks of March.

Terry Francl, a senior economist for the American Farm Bureau Federation, predicted corn prices will continue to rise but he said consumers shouldn’t panic just yet.

Many farmers will take a look at the report and decide to plant corn instead of other crops, he said, and weather conditions could also change things.

“We’re going to have to wait until we go through the spring planting season,” he said.

John Hoffman, a soybean grower from Waterloo, Iowa and president of the American Soybean Association, said farmers will always find ways to grow more crops to stabilize prices. Though high prices are good for the farmers, there’s bound to be a correction, he said.

“There’s an old saying out on the farm that the cure for high prices is high prices.”