Groceries’ Increasing Costs

By Beacon Staff

The shopping list of grocery items, from milk to beef to cereal, is expected to continue costing more in the coming months as a consequence of the worst U.S. drought in over 50 years and a possible hike in fuel prices.

Overall food prices across the nation will likely rise nearly 4 percent this fall and continue increasing into next year, according to the latest U.S. Department of Agriculture consumer food price index outlook released Aug. 24.

The forecast estimates that prices for beef, poultry and fish would rise between 3 to 5 percent. Food prices have already risen 1 percent so far this year. Last year, overall retail-food prices jumped 3.7 percent.

The percent increases are expected to continue or even rise through 2013.

“The severe drought in the Midwest is affecting prices for corn and soybeans as well as other field crops which should, in turn, drive up retail food prices,” Richard Volpe with the USDA said in the outlook report. “However, 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.”

Americans on average spend roughly 13 percent of their household budgets on groceries, according to the U.S. Bureau of Labor Statistics.

“The full extent of the drought and its effects on commodity prices are as yet unknown,” Volpe wrote.

The government announced last week that 63.2 percent of the country is plagued by drought amid the hottest year on record. The USDA has declared natural disasters in 35 states. But the stalled Farm Bill, which is gridlocked in Congress, has frozen common financial aid for farmers, particularly when it comes to disaster relief.

“I’ve been urging the House of Representatives to get a bill to the floor and get it voted on so they can conference with the Senate and get a farm bill passed,” Agriculture Secretary Tom Vilsack said in a news release recently.

The drought conditions have adversely affected almost 90 percent of the nation’s corn, one of the main sources of processed food and livestock feed. Corn prices have spiked 61 percent since June, and the crop hit a record-high on the Chicago Board of Trade, according to Bloomberg news services.

The repercussions from damaged corn harvests affect all aspects of the nation’s food chain. Ranchers are being forced to change feed patterns for livestock. Processed food, with corn products as main ingredients, is becoming costlier.

Oil prices threaten to worsen the situation. Oil has risen 13 percent in the last year. Average national gas prices have increased 39 cents since July, according to the AAA.

Gas prices could hike another 10 cents through Labor Day weekend, the head of the U.S. Energy Information Administration told Bloomberg news services.

Apart from the nation’s agricultural woes, the climate and conditions for local growers remain favorable, leading to strong crop yields.

Northwest Montana’s soil has largely avoided the drought and farmers have begun shipping out quality, protein-rich crops.

“The winter wheat and barley yields are looking really good,” said Mark Lalum, general manager at CHS Kalispell.

Lalum expects the spring wheat currently being harvested to be a little behind the winter yields because of hotter temperatures in July and August.

But, “right now the crop I’m seeing is coming in really good,” he said. “We have some really beautiful crop coming in. It looks to be a really nice crop and proteins are solid.”

Lalum said the early forecasts show a strong spring harvest especially when compared to the situation plaguing growers nationally.

“When you start looking at what’s happening more south, it’s nasty,” he said. “Corn and soybeans are just going through the roof. There are some areas you could see a 50 percent reduction in corn fuels. The demand for corn and soybeans is astronomical.”

The spike in crop prices nationwide will likely benefit local growers, Lalum said.

“High yields and high price is really a nice combo,” he said. “We’ll just see.”