Quantcast
Get breaking news alerts via email

Click here to manage your alerts
Eric Gay | Associated Press file photo Nationally, cattle numbers are down because of drought that has hit Texas, the southern plains and,the southwest, forcing ranchers to sell off their cattle or pay top dollar for feed. Costs for feed also have been soaring, heightened by demand for corn to produce ethanol.
USDA says drought will push up food prices in 2013
Groceries » Costs could rise 4 percent or more on some goods.
First Published Jul 25 2012 02:48 pm • Last Updated Oct 30 2012 11:33 pm

The drought gripping more than half the country is a major reason why consumers can expect to pay at least 3 percent to 4 percent more for groceries next year, the U.S. Department of Agriculture said Wednesday.

Milk, eggs, beef, poultry and pork prices will all be affected because the drought has pushed up prices for feed, and that will eventually translate into higher prices for steaks, hamburger, pork chops and chicken. The good news for cost-conscious consumers is that prices for fruits and vegetables, as well as processed foods, aren’t affected as much by the drought.

Join the Discussion
Post a Comment

Exactly how much more people might pay for a pound of hamburger, for example, isn’t known because those prices are affected by lots of factors, including how much of the increase a given supermarket might pass along to the consumer. But beef prices as a whole are expected to see the biggest jump at 4 percent to 5 percent, according to the USDA.

Dairy product prices are forecast to climb 3.5 percent to 4.5 percent; poultry and egg prices are projected to rise 3 percent to 4 percent; and pork prices are expected to rise up to 3.5 percent in 2013, the agency said.

"In 2013 as a result of this drought we are looking at above-normal food price inflation. ... Consumers are certainly going to feel it," USDA economist Richard Volpe said.

Normal grocery price inflation is about 2.8 percent a year, Volpe said, so even a 3 percent increase is slightly higher than usual. The USDA kept its projected food price increase for 2012 steady at 2.5 percent to 3.5 percent, saying average retail food prices were flat for the first half of 2012 thanks to unusually low fruit and vegetable prices as well as lower prices for milk and pork.

The new forecasts are the agency’s first food price projections to factor in the drought, although experts have been warning for a few weeks that prices will rise. As fields dry out and crops wither across much of the country’s midsection, prices for corn, soybeans and other commodities have soared in anticipation of tight supplies. That means farmers and ranchers will have to pay more to feed their livestock, and those costs eventually get passed on to consumers. Food prices typically climb about 1 percent for every 50 percent increase in average corn prices, according to agricultural economists.

Processed foods aren’t affected as much because feed costs don’t account for as much of their price tag. And fruits and vegetables aren’t expected to be any more costly because they are irrigated even in normal weather. The USDA is projecting an overall 2 percent to 3 percent increase for all fruits and vegetables next year, the same as it expects this year.

USDA economists were aware of the drought a month ago when they did their last projections but didn’t know how bad it would get, Volpe said.

"This drought was a surprise for everybody," he said. "The USDA was forecasting a record year for the corn crop until this drought materialized. Now we’re not going to get that."


story continues below
story continues below

The drought covers around 60 percent of the continental United States, the largest area since the epic droughts of the 1930s and 1950s.

"It’s a disaster," said Rick Tolman, CEO of the National Corn Growers Association, who noted farmers started out the season anticipating a record 14 billion bushel corn crop. The drought is expected to cut production by roughly 3 billion bushels. "We would have had adequate supplies, prices would have gone down. Instead we have the drought," he said.

Poultry prices will be the first to rise because chickens and turkeys need only a few months to grow to market size, Volpe said. Beef and pork take longer, and the agency actually revised its beef price projection for 2012 downward because producers are sending more cattle to the market as they reduce their herds in response to the drought, he said.

Meat and poultry prices will be more affected than processed food prices because feed prices represent the biggest part of their cost of production. Processed food prices are less affected because corn and other ingredients typically make up just a fraction of their production costs compared with expenses such as transportation and marketing.

Food companies are already reacting, even turning abroad in some cases to blunt the impact of higher corn prices and tight supplies. Smithfield Foods Inc., the world’s largest pork producer, has bought corn from Brazil, spokeswoman Keira Lombardo confirmed.

The drought is creating multiple problems for dairy farmers that consumers will eventually feel, said Ed Jesse, an emeritus professor of agricultural economics at the University of Wisconsin-Madison.

Farmers have begun culling their herds, which will mean less milk down the line. Also, cows give less milk in that heat, and the milk they do produce is lower in proteins and butterfat, Jesse said. That means cheese and butter prices are going up because it takes more milk to produce the same amount.

Jesse predicted that milk prices for consumers will rise by 10 percent or more, and he expects those prices to stay high into next year until herds start to recover.

"I don’t think farmers are in a very happy state right now," he said.



Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment


About Reader Comments


Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Videos
Jobs
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.