U.S. consumers may pay 3 percent to 4 percent more for food next year, and less for meat in 2012 than previously forecast, as the country’s worst drought since the 1950s works its way onto store shelves, the USDA said.
Prices for meat, poultry and fish will rise 3 percent to 4 percent in 2012, one-half of a percentage point less than estimated last month, the U.S. Department of Agriculture said in a report today on its website.
The price of corn, the main feed source for animals, has surged 61 percent since June 15 through yesterday, pushing ranchers to send animals to slaughter sooner and temporarily boosting supplies.
“The current drought is anticipated to reduce cattle herd sizes due to increased feed costs which is expected, in turn, to increase the retail beef supply and reduce prices somewhat in the short term,” Richard Volpe, the USDA’s food economist, said in a note accompanying the forecast.
Corn and soybean futures reached record highs this month on the Chicago Board of Trade, and wheat has touched its highest since 2008 as crop conditions worsened in the U.S. Midwest and Great Plains. The drought prompted the USDA to declare natural disasters in more than 1,800 counties in 35 states, more than half of the country’s total.
Food costs as a whole will rise 2.5 percent to 3.5 percent this year, the agency said, leaving unchanged the 2012 estimate it issued last month.
Rising oil and gasoline expenses may pose a new threat to nutrition costs, said Chad Hart, an economist at Iowa State University. “Anytime you have oil and gas prices moving up, that will hit us on the food dollar.”
Oil is up 13 percent over the past year on international instability and tight supplies. The nationwide average price of regular gasoline at the pump has risen 12 percent to $3.73 a gallon since July 1, according to the AAA, the nation’s largest motoring organization. Energy and transportation accounts for about 8.2 cents of each dollar spent on food, compared with about 4 cents for farm commodities, according to the U.S. Department of Agriculture.
“If oil prices keep going up as they have recently, that could have a greater impact on food costs than what’s associated with what’s going on with the drought,” Agriculture Secretary Tom Vilsack said in an interview Aug. 16.
Food prices have risen 1 percent so far this year, the government said earlier this month. Retail-food costs rose 3.7 percent in 2011, according to the USDA.