The USDA’s Economic Research Service (ERS) is predicting a rise in food prices this year (2013), due mainly to the continued severe drought that is affecting much of the U.S. “The most severe and extensive drought in at least 25 years seriously affected U.S. agriculture, with impacts on the crop and livestock sectors and with the potential to affect food prices at the retail level.” (ERS) The drought ramped up in June and July of 2012, and has remained at very severe levels. About 80 percent of U.S. agricultural land was affected by the drought in 2012. At this point in time, February 2013, the drought continues unabated.
The U.S. maize and soybean crops were severely affected, resulting in a sharp increase in animal feed prices. Producers then culled their herds to reduce the amount of feed that they would need to buy. Short-term, “this liquidation led to temporarily reduced prices for beef and pork in the months of August and September. However … the impact of the liquidation has ended and prices for beef and pork are now expected to increase through 2013.” (ERS) Prices for beef, poultry, eggs, and milk have increased steadily since September 2012.
A recent news report states that feedlots and meatpacking plants are closing, due to a shortage of cattle.
“Years of drought are reshaping the U.S. beef industry with feedlots and a major meatpacking plant closing because there are too few cattle left in the United States to support them. Some feedlots in the nation’s major cattle-producing states have already been dismantled, and others are sitting empty. Operators say they don’t expect a recovery anytime soon, with high feed prices, much of the country still in drought and a long time needed to rebuild herds.”
The most recent Weekly Weather and Crop Bulletin from the USDA indicates that the drought is now affecting winter wheat production as well. Most winter wheat is grown within the same area affected by the drought. In Texas, for example, 49% of the winter wheat crop was reported to be in poor to very poor condition. Oklahoma, South Dakota, and Nebraska wheat crops have fared even worse. And in Kansas, 85% range and pasture land used to graze cattle was rated poor to very poor. Nationwide, over 50% of pasture land had the same low rating.
The combined effect of poor grazing land and high animal feed prices will likely cause meat supplies to fall and prices to rise. The winter wheat condition is particularly troubling, because wheat is such an important ingredient in a vast array of retail foods. The bread basket of America, the Midwest, is drying up. The result is sure to be higher prices for many different foods.