Reuters: U.S.: Drought lights fire under food prices, USDA says

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Drought lights fire under food prices, USDA says Jul 25th 2012, 21:42 Tweet Share this Email Print Related News Midwest drought fears worsen, grain prices jump 3:33pm EDT Crops get much-needed drink, more rains needed soon Tue, Jul 24 2012 Farmers seen weathering 2012 drought better than in 1988 Tue, Jul 24 2012 U.S. crops bake in searing heat, no relief for weeks Fri, Jul 20 2012 No food crisis yet as grain prices soar: U.N. Fri, Jul 20 2012 Drought-damaged ears of corn are seen against dry, cracked earth on a farm near Fairbury, Illinois July 24, 2012. Credit: Reuters/Karl Plume By Russ Blinch WASHINGTON | Wed Jul 25, 2012 5:42pm EDT WASHINGTON (Reuters) - Food prices will race ahead faster than prices of other goods in the United States this year and next, due to the worst drought in more than a half a century, the government forecast on Wednesday. Food prices rose 3.7 percent in 2011, and American consumers may pay 3.5 percent more at the grocery store this year, with higher prices for meat, poultry and fruit, as the drought gripping the U.S. farm belt drives up crop prices. The U.S. Department of Agriculture forecast that food prices would jump between 2.5 percent and 3.5 percent in 2012 and then rise 3-4 percent in 2013. "The drought is really going to hit food prices next year," said Richard Volpe, a USDA economist, adding the pressure on food prices would start to build later this year. "It's already affecting corn and soybean prices, but then it has to work its way all the way through the system into feed prices and then animal prices, then wholesale prices and then finally, retail prices," Volpe said. Food prices will rise far more rapidly than the overall U.S. inflation rate, according to USDA, a turnabout from the usual pattern. The U.S. inflation rate is estimated for 2 percent this year and 1.9 percent in 2013. Food inflation was 3.7 percent last year but only 0.8 percent in 2010. Corn and soybeans have hit record highs on concerns the drought will slash yields for grain that is already in tight supply globally. Corn for September delivery was up 3.5 cents on Wednesday to $7.93 a bushel after forecasts showing the region could expect only patchy rains and more of the scorching triple digit heat. (Reporting By Russ Blinch) Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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