Food prices expected to rise as drought continues

Hardly a day passes that there aren't new pictures and signs of the Great Drought of 2012. The government put out a report Friday that brings home just how severe it is. It is not just farmers and stockmen who are affected: It's going to mean higher food prices for everyone.

Nearly one quarter of the United States is now in what the government classifies as "extreme or exceptional"drought.

For the second month in a row, the Agriculture Department said that means corn and soybean production will be down this year, 13 percent and 12 percent respectively. Beef production will be down 4 percent as well.

The worst drought in half a century sent corn prices to a record high on the floor of the Chicago Board of Trade Friday.

"This is not inflation. We just don't have any,"said trader Scott Shallady of the Trean Group.

Shallady said this wasn't good news for prices.

""In the short term you'll see prices at your dinner table rise 3 to 5 percent,"he explained. "And if we really don't get an answer to this question it could be a 10 percent rise in the next six to eight months."