Last summer’s drought expected to drive up this year’s grocery prices

Drought conditions in the Midwest last summer and fall set in motion a domino effect expected to raise food prices 2.5 to 3.5 percent this year.

The drought affected prices for corn, soybeans and other field crops, and that should, in turn, affect retail food prices, according to the U.S. Department of Agriculture Economic Research Service. But that process typically takes several months before it becomes apparent in the supermarket.

Retail food prices “were mostly flat in 2012,” according to the most recent ERS FoodPrice Outlook, 2013 report. However, the report noted, “the transmission of commodity price changes into retail prices typically takes several months to occur, and most of the impact of the drought is expected to be realized in 2013.”

Last year’s drought in the Midwest led to record-high corn and soybean prices, said Tony Banks, a commodity marketing specialist for Virginia Farm Bureau Federation. Both crops are used to feed livestock and poultry, as well as to make many food products.

“When drought conditions affected land used for grazing, making it more expensive to feed animals during the warmer months, many farmers and ranchers were forced to reduce the size of their cattle herds, creating lower beef prices,” Banks explained.

“In 2013 consumers can expect somewhat higher prices for milk, beef, pork and poultry due to 2012’s feed prices’ depressing effect on meat production. Other processed foods such as cereal, dairy products and foods and condiments that contain corn-, soy- or wheat-based ingredients may also experience a slight price increase.”