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USDA says drought will raise food prices in 2013

Consumers should expect higher prices for milk, eggs and meat, analysts say.

By STEVE KARNOWSKI Published: July 26, 2012
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/articleid/3695472/1/pictures/1783079">Photo - Butcher Freddie Quina cuts meat Wednesday at Super Cao Nguyen in Oklahoma City. AP Photo
Butcher Freddie Quina cuts meat Wednesday at Super Cao Nguyen in Oklahoma City. AP Photo

Processed foods aren’t affected as much because feed costs don’t account for as much of their price tag. 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,” Volpe said. “The USDA was forecasting a record year for the corn crop until this drought materialized.”

The drought now 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.

Scott Shellady, a commodities trader in Chicago, said the situation with the corn crop could affect other countries as well because U.S. food exports have increased dramatically in the last couple of decades.

“So we have an issue here where we have been feeding the world, but we’re going to have to slowly but surely dampen down those exports,” Shellady 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.


Read the rest of the story on Oklahoman.com
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