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Food Prices To Rise Above Inflation Rate

posted on February 8, 2013

President Obama urged lawmakers this week to approve at least a three-month delay to automatic spending cuts currently scheduled to take effect March 1st

 In the meantime, farm subsidies are being eyed as a potential bargaining chip.  According to Senate Agriculture Committee Chairwoman Debbie Stabenow, the prime targets for spending cuts are direct payments that compensate producers regardless of yield or market price. 

Stabenow says she would prefer that farm policy reforms be made in the broader context of the Farm Bill, but the Michigan Democrat told POLITICO this week she cannot defend direct payments. 

Tinkering with the 2013 payment levels could significantly impact the ability of farmers to get financing.  And with the nation gripped in the worst drought in half-a-century, any changes in the Farm Safety Net could have sweeping implications for producers – -- and consumers… 

And a trip to the grocery store, these days reveals that food prices are already on the rise. 

Food Prices To Rise Above Inflation Rate

As snow falls across America, the reduction of drought is slight.

This week’s snow cover map from Intellicast shows increasing snowpack in the northern states. But it it’s nowhere near the amount needed as evidenced by the University of Nebraska’s Drought Monitor.

Just under 68 percent of the land in the continental U.S. is rated abnormally dry to exceptional drought category, down two points this week.

The arid conditions prompted a USDA economist to say higher-than-normal food price inflation this year.

Ricky Volpe, USDA Economic Research Service: “It had substantial and devastating impacts on the major field crops of the American Midwest. The most important field crop there is field corn. Now, people don’t eat field corn directly, but it’s processed into animal feed and that’s a major input to the U.S. food supply chain so we’re seeing input costs rise for all the meat products and then all of these animal based products that consumers buy regularly. We’re looking at inflation on the order of about three to four percent for beef and veal, pork, poultry, eggs and even a little bit higher for dairy. For dairy we’re looking at probably three and a half to four and a half percent.”

Volpe says the second half of this year will likely be when the full effects of drought will be realized on the price of processed food.

Ricky Volpe, USDA Economic Research Service: “These all rely on commodities. They rely on field corn and soybeans and so on and those input costs are going up. It’s just that due to the more stages that are involved in bringing in the supermarkets and the contracts that govern those commodity prices for those foods, consumers won’t see that until later in the year and even probably to some small extent in the early part of 2014.”

The rise in commodities may not impact all items in your grocery store aisles, as normal food price inflation is two-point-eight percent is likely to be in place for most items.

Ricky Volpe, USDA Economic Research Service: “So for most food categories that are not impacted directly by these higher commodity prices, especially field corn, we’re looking at pretty normal food price inflation.”

Tags: beef budget cattle corn drought economy families feed prices food prices inflation news Ricky Volpe snow snow cover weather