Pray For Rain: Food Prices Heading Higher
The record drought gripping half the country will help
push food prices up by 3 percent to 4 percent next year, the U.S. Department of
Agriculture said Wednesday.
Milk, eggs, beef, poultry and pork prices will all be
affected by the drought, which has pushed up prices for feed. Beef prices are
expected to see the biggest jump at 4 percent to 5 percent. 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 2.5 percent 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, he
added, so even at the low end of the projected range people will see their
grocery expenses rise more than usual next year. The USDA kept its projected
food price increase for 2012 steady at 2.5 percent to 3.5 percent.
The figures are the agency's first food price projections
to factor in the drought, though farmers and others have been warning that
prices will rise. The drought has sent corn, soybean and other commodity prices
soaring in recent weeks as fields dry out and crops wither across much of the
country's midsection.
Volpe said the drought is not expected to affect prices
for fruits and vegetables. Most of those crops are irrigated. 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,"
Volpe said. "The USDA was forecasting a record year for the corn crop
until this drought materialized. Now we're not going to get that."
Poultry prices will be the first to rise because of the
drought because chickens and turkeys need only a few months to grow to market
size, he 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 at the moment as they reduce their herds in response to
the drought, he said.
Meat and poultry prices are the most affected because
feed prices represent the biggest part of their cost of production. Processed
food prices are less affected by changes in commodity prices because
ingredients typically make up just a fraction of their production costs.
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