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Expect higher food prices thanks to the drought

Farmers all over the Midwest battled dry fields like this one in Stockville, Neb., throughout the summer of 2012. (File photo: Grant Gerlock/Harvest Public Media)
Farmers all over the Midwest battled dry fields like this one in Stockville, Neb., throughout the summer of 2012. (File photo: Grant Gerlock/Harvest Public Media)

The drought devastating Midwest farmers and ranchers will fully reach its tentacles from the field to your table this year, according to a recent USDA report. The USDA expects food prices to rise, largely because many Midwestern corn farmers weren’t able to grow a full corn crop.

Farmers and ranchers around the country spent the year screaming about the drought ravaging their fields and wrecking their harvests. But thanks to the complex food system in which it often takes months for food to travel from farm to grocery store, consumers didn’t feel much of a pinch. The food section of the Consumer Price Index, which measures the relative cost of food, rose only .5 percent in 2012. The USDA expects it to grow 3-4 percent this year, an increase above the historical average.

Price increases highlight both the importance of the U.S. corn crop and the intricate machinations of the food system. The drought decimated field corn stocks from Indiana to Kansas and last year U.S. farmers harvested the fewest bushels of corn in any year since 1995. Consumers, though, don’t actually consume field corn – it’s used in animal feed -- so low corn stocks drive up the cost of meat, and dairy products like butter and yogurt.

“(Corn is) a major input to the U.S. food supply chain,” Richard Volpe, a USDA economist said in a recent video post. “So we’re seeing input costs rise from all the meat products and all of these animal-based products that consumers buy regularly.”

Many ranchers downsized their herds last year thanks to skyrocketing feed costs. Economists expect that will cause a shortfall in this year’s supply and a corresponding spike in the price of beef.

“The transmission of commodity price changes into retail prices typically takes several months to occur, and most of the impact of the drought will be realized in 2013,” the USDA says.

You may have already noticed higher prices on some of the food you buy at the grocery store. Beef, poultry and fruit prices increased in 2012, but the USDA charted price decreases in pork, eggs and vegetables. The 2013 outlook, however, expects rising food prices across the board.