USDA Predicts Food Prices To Rise In Drought's Wake

The USDA released its latest forecast on retail food prices on Wednesday. The drought is expected to affect prices for corn, and beef and poultry prices are expected to rise as much as 4.5 percent this year, but it's too soon to know exactly how much it will affect consumer's wallets.

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ROBERT SIEGEL, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

AUDIE CORNISH, HOST:

And I'm Audie Cornish. We begin this hour with the drought and how it could affect your grocery bill. Today, the U.S. Agriculture Department designated 76 more counties as disaster areas because of the drought and excessive heat. And it said that severe drought will likely affect prices for corn and other field crops, although it's too soon to know how much prices will go up.

We have two stories on drought and food. Our first comes from NPR's Allison Keyes.

ALLISON KEYES, BYLINE: The government's forecast for food inflation prices for this year is between 2 and a half to 3 and a half percent. That seems moderate, but these aren't final numbers by any means. Take beef, for instance. USDA spokesman Ricky Volpe says beef rose 10 percent last year in the wake of several years of tough weather and high energy prices. That forced ranchers to slaughter a lot of livestock, leading to low inventories. Volpe says the cost of beef could rise as much as four and a half percent this year and next year it could go up an additional 5 percent.

RICKY VOLPE: Inventories are still low. They're only going to go lower as feed prices rise. So these high prices, this high inflation, it's here to stay.

KEYES: Cattle, hogs and chickens often eat corn, and the price for it is going up and up. Volpe says you'll see the tangible impact on little animals like chickens first.

VOLPE: These chickens, they're a small animals. They grow quickly. They go to market quickly, so we do expect now prices for poultry products in general to increase three and a half to four and a half percent in 2012.

KEYES: And they're projecting only slightly less of an increase in poultry prices for next year.

ERIC NEAL: It's hard not to get panicky in situations like this.

KEYES: That's Eric Neal(ph), who runs a grazing dairy farm near Harrisonville, Missouri. He's had to buy pricey food for the cattle he usually feeds with the grass he grows, thanks to two years of drought. Neal says though the situation is increasingly bad for dairy farmers, unlike cow or pig operations, they have more flexibility.

NEAL: We can overproduce and under-produce very quickly. We can adjust our rations while we feed our cows and that allows us to produce more milk or less milk quickly.

KEYES: But Neal says he doesn't think the 3 percent rise in milk prices the USDA is forecasting for this year, and another 4 and a half percent increase next year, will help him much because feed costs so much right now.

SOPHIE MILAM: We're deeply concerned about the impact of rising food prices on low-income households.

KEYES: Sophie Milam at Feeding America says poor households are already forced to make tradeoffs between what they can afford and the nutritional value of the food they buy - at higher prices, even in small percentages are a challenge.

MILAM: Certainly, when we're talking about staple foods like eggs, milk and proteins that families need to have a nutritious diet, it's of special concern to us.

KEYES: Milam says the drought's impact will eventually affect the charity's food banks, which buys some of the food they distribute. And the USDA's Volpe adds that the agency may have to revise its forecast for food prices if the drought gets worse.

VOLPE: Until we get that first major rainfall in the Midwest, we don't know exactly how serious this drought will be. We don't know the extent to which the corn crop can recover, if at all.

KEYES: It's clear that every day it doesn't rain, it gets worse, and the estimates, invariably, are less reliable. Allison Keyes, NPR News, Washington.

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