Report: From Steak to Cereal, U.S. Drought Inflates Food Prices
Consumers have just started to feel the effects of last summer’s drought at the supermarket, and prices are expected to continue increasing throughout 2013.
By Codi Yeager-Kozacek
THURSDAY, 04 APRIL 2013
When it became clear last August that crippling heat and dryness would severely curtail U.S. corn production, prices for the grain shot to record highs. Now, eight months later, consumers in the United States are looking at a 3 to 4 percent inflation rate for food prices in 2013, according to the U.S. Department of Agriculture (USDA).
“This forecast represents an annual increase that is above the historical average for both indexes,” said the USDA’s latest Food Price Outlook, released March 25. The agency measures an index for food price inflation overall, as well as an index for ‘food-at-home,’ or grocery store, price inflation. “Inflation is expected to remain strong, especially in the first half of 2013, for most animal-based food products due to higher feed prices.”
In any given year with normal economic conditions — no drought, no recession — the country typically sees an annual rate of food inflation between 2.5 and 3.5 percent. Though this may not seem much different than the rates expected this year, USDA analyst Ricky Volpe warns against underestimating the effects.
“It is only 0.5 percent of a difference. But I don’t mean to marginalize that, because this is coming at a particularly hard time for consumers and for food prices,” Volpe told Circle of Blue. “Food prices are already very high, and these increases are above and beyond that.”