Experts say it’s because grocery pricing is about more than just commodities.

“Raw commodity costs represent about 20% of the total food bill at the grocery store. The other 80% represents all the other costs that are involved getting food from the farm to the grocery store,” said Scott Irwin, an agriculture economist at the University of Illinois.

According to the USDA, those “other costs” include:
• 48% labor
• 10% packaging
• 10% transportation
• 6% profits
• 26% other (advertising, promotion, taxes, interest and depreciation)

Supermarket chains have been trying to preserve customer visits in an effort to stop losing fill-in sales to convenience stores. Wegman’s, a regional Northeast and Mid-Atlantic grocery chain, is eating into its own profits by cutting prices 5% throughout its stores.

The USDA, meanwhile, is predicting another 5% food increase for next year, the CBS study reported.

U.S. farmers delivered a bumper crop in 2008, according to a government report released Monday that eased fears of a looming food shortage but caused commodity prices to drop.

Corn futures dropped 60 cents, or 7 percent, to close at $3.81 a bushel on the Chicago Board of Trade after the report was released. Soybeans also fell 7 percent, losing 70 cents to close at $9.66 a bushel.

Midwestern farmers delivered the second-largest corn crop in U.S. history in spite of massive flooding that ripped through Iowa, Missouri and elsewhere this summer. There were 12.1 billion bushels of corn grown for use as grain, down 7 percent from 2007′s all-time record of 13.04 billion bushels, according to the U.S. Department of Agriculture’s National Agricultural Statistics Service.

The soybean crop of 2.96 billion bushels was the fourth largest in U.S. history, up 11 percent from 2007.

News of the bounty came just six months after global commodity traders pushed crop prices to all-time highs on fears that growing demand for grain and crop-based fuels like ethanol would strain global food supplies.

Milk prices have headed south as the global economy has weakened, offering some relief for food companies struggling with dairy costs.

Potential beneficiaries of the trend could range from manufacturers like Kraft Foods Inc. (KFT) to cheese users like Domino’s Pizza Inc. (DPZ), although packaged food companies like Kraft may simultaneously feel pressure from retailers to cut prices for some of their own branded products.

A confluence of factors have helped push milk costs lower – most notably weakening economic conditions worldwide have prompted lower demand for U.S. milk exports while the high prices of recent years have ensured healthy dairy supply.

“We are going to be in a period where [milk] prices are quite low,” says Stifel Nicolaus analyst Chris Growe.

Milk prices were over $20 per hundredweight, or per hundred pounds, at the start of 2008 and finished the year flirting with the $10 level, the Western Milling Weekly Feed and Dairy Newsletter recently noted. A variety of other indicators of dairy prices are also pointing downward. In an early January note, Growe noted that cheese prices had also moved lower for 17 straight trading sessions.

At the same time, energy costs fell 17 percent and transportation expenses dropped 10 percent in November.

“The truth is corn prices have almost no effect on grocery store prices, and apparently even the impact of fuel costs is minimal,” said Randy Woodruff, president of the Wisconsin Corn Growers Association, in a press release.

“There are literally only pennies of farm value in that goose, turkey or roast you will eat for Christmas dinner. And while corn growers and consumers alike suffer the effects of a shaky U.S. economy, some of this country’s top food companies continue to ring up record profits.”

In fact, an 18-ounce box of corn flakes today contains less than 4 cents worth of corn but still costs as much, if not more, than it did last summer, Woodruff said.

Nevertheless, cereal giant Kellogg’s reported $342 million in net earnings, a 12 percent rise, while competitor General Mills reported $632 million in operating profits this fall, a 9 percent increase. Kraft Food’s revenue rose 19 percent and Campbell’s earnings rose 45 percent.

Grocers are pushing big deals to get value-minded shoppers into their stores for holiday meal shopping.

For most grocers, the current quarter holds three big “eating” holidays: Thanksgiving, Christmas and New Year’s, so they often hold large promotions this time of the year. But 2008′s economic woes have given holiday grocery marketing a more modest tone.

“With everyone trying to stretch budgets this holiday season, we are giving even better deals on our high-quality products so our customers don’t have to compromise,” Fresh & Easy Neighborhood Market Chief Marketing Officer Simon Uwins said in a statement.

The El Segundo, Calif.-based chain halved prices on key holiday items such as pecan pie and cooked shrimp to draw shoppers.

Low-cost grocer Save-A-Lot has developed five plans for feeding 10 people for $25 or less. Some suggest a full meal with main dishes, sides, desserts and beverages, while others are designed for parties — with an array of hors d’oeuvres or desserts.

“These are very difficult times for many Americans,” said Bill Shaner, president and CEO of Save-A-Lot.

The retailer will continue seeking ways to help its customers save money in the New Year, including offering ideas for $1 school lunches, meal plans that feed a family of four for $4, and more, Shaner said.

Other grocers, like Kroger Co. and Safeway Inc., have been pushing deals that tie spending at the store with savings at the gas pump.

Grocers have been one of the bright spots in retail during the downturn, but they say they have seen consumers focus more on staples and store brands than more expensive food.