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Swing in food prices expected as result of drought
Meat and poultry prices are expected to drop over the next few months before jumping to possible record-high prices. This year’s drought — the worst in half a century -— is the reason for the bouncing around of prices.
“In the short run, consumers should see some bargains with the liquidation and culling of beef and swine herds as farmers deal with high feed costs or unavailable forages,” said David White, senior director of issues management for Ohio Farm Bureau. “Consumers should take advantage of these prices in the fall and fill their freezers because after that, there’s going to be a shortage if the demand for beef, pork and poultry remains the same.”
The latest figures from the U.S. Department of Agriculture’s National Agricultural Statistic Service show 51 percent of U.S. corn and 38 percent of soybeans were rated in very poor to poor condition, while 59 percent of rangeland and pastures were in poor or very poor condition. The USDA predicted some improvement for the Ohio Valley and Great Lakes region in September.
The latest USDA’s food price outlook showed a 2.5 percent to 3.5 percent increase in food prices this year and 3 percent to 4 percent in 2013. Typically there is a 3 percent increase annually. USDA expects the biggest increase to be in beef and veal prices, which could go up 4 percent this year and as much as 5 percent next year. Other projected increases in 2013 are 3.5 percent to 4.5 percent for dairy products, 3 percent to 4 percent for poultry and eggs and 2.5 percent to 3.5 percent for pork. That will mean an extra $615 in grocery bills for an average family of four, according to USDA.
“As we see the harvest, we’ll have a better idea of the impact of the drought and what it will do to feed prices. There is going to be an increase in feed prices because feedstuffs will not be as plentiful. The question is how much of a shortage will there be?” White said.
According to USDA, the worst drought in a half century and record feed prices are spurring farmers to shrink cattle herds to the smallest in two generations. USDA estimates that beef output will slump to a nine-year low in 2013. The domestic herd is now the smallest since at least 1973. Some experts predict that beef cow herd numbers will continue to decline for most of the next 10 years. Purdue ag economist Chris Hurt said the nation’s pork industry will continue to experience some of its worst economic losses in recent history as the record-setting drought decimates feed supplies.This year’s drought is expected to cause food prices to go up less than they did in 2007-2008, when record-high oil prices cut into all aspects of agriculture. In 2007, food price inflation was 4 percent and 5.5 percent in 2008. Oil prices are not at the 2007-2008 levels and the world has had time to adjust, White said.
For now, White urged farmers to reach out to consumers and answer any questions they may have about the drought’s impact on food prices.Photo credit: istockphoto.com