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Watch: How the Futures Market Keeps Your Grocery Bill Down

Jun 9, 2016

At the grocery store, processed foods such as cereal, crackers, and candy usually maintain the same price for a long time, and inch up only gradually. Economists call these prices "sticky" because they don't move much even as some of the commodities that go into them do.

Take corn, for example, which can be a major food player as a grain, a starch or a sweetener.  

Corn prices can fluctuate widely, so why don’t products containing corn also see price changes? Why does your cereal pretty much cost $3 per box every week?

It’s partly thanks to the futures market.

Farmers use various tools to control the many risks in agriculture. Watching the weather influences when they plant or harvest. Buying crop insurance and selecting farm bill safety net programs helps protect them from crop devastation.

But they can also manage some of the threat posed by volatile market prices by participating in the futures market. The futures market helps both producers and users of a major commodity, such as corn, defend themselves against major prices changes.

Here at Harvest Public Media, we wanted to better understand how that works and how the benefits trickle down to regular food consumers.

Watch the video to check out what we learned.