Thanksgiving turkey to be among first to show drought price hike
BY FRANCINE KNOWLES Business Reporterfirstname.lastname@example.org October 8, 2012 5:34PM
Stephanie Dowell/Post-Tribune Juanita Bewley of Merrillville, with daughter Ianna, 3, reads the back of a frozen food item as she and her family grocery shop at Pay Low in Merrillville, Ind. Wednesday December 1, 2010. The American Farm Bureau released its annual Thanksgiving dinner prices recently. ptmet
Updated: November 10, 2012 6:15AM
The summer’s drought will push food prices higher just in time for Thanksgiving dinner.
Grocery shoppers can expect to see drought-related price increases in the coming weeks on turkey, eggs, vegetable oils and dairy products.
Poultry prices are 5.6 percent higher than prices last year, with chicken prices up 5.3 percent and other poultry prices, including turkey, up 6.9 percent, according to the latest Consumer Price Index figures. The poultry category has been expected to be among the first to reflect price increases caused by the drought.
But the biggest pain won’t hit until next year, when the impact of the drought is expected to be felt on a wide range of foods from cereals to soups, the U.S. Department of Agriculture’s Energy Research Services forecasts.
The worst drought to hit the Midwest in decades drove up the price of feed corn and soybeans, which will impact animal-based products the end of this year and throughout 2013, according to Ricky Volpe, research economist at the agency.
“Consumers are going to see major impacts for beef and veal,” he said. “We’re looking at 4 percent to 5 percent in 2013, another 3 to 4 percent for poultry products, which is a huge category where up until recently consumers were actually seeing a little bit of price relief.”
Volpe was citing Consumer Price Index data.
“Ordinarily, we would expect poultry prices in a normal year to go up two, two-and-a-half percent,” he said. “So it’s a pretty significant gap between what normally happens and what we’re expecting to happen.”
Milk prices will also rise. The USDA is forecasting a 3.5 percent to 4.5 percent increase for dairy products next year, particularly fluid milk, Volpe said.
“Within a couple of months, I’d expect that we should start to see higher milk prices (at the retail level) and then further on down the chain, cheese, sour cream and so on,” he said.
Scrambling those eggs will cost you more next year, and in fact it’s costing you more already. Egg prices jumped 8.1 percent in August from July and are 5.5 percent above August 2011. The agency expects egg prices to rise 2.5 percent to 3.5 percent for the full year this year, and 3 percent to 4 percent next year.
“In the first quarter, we would expect to see substantial impacts for most animal-based products, most meats, dairy, eggs,” Volpe said. “The latter three quarters of the year is where we would expect to see the bigger impacts for the shelf stable processed packaged foods.”
He cited foods that rely on corn and soybeans: condiments and soups, side dishes, packaged breads, breakfast cereals and soda pop. “Those impacts will be kind of distributed throughout the course of the year as the year wears on, even through the end of the year, possibly even into the beginning of 2014,” he said.
Grocery shelf products are likely to be the last to show drought-related increases.
“There are too many components to bring food from the farm to the supermarket for us to see effects this quickly for the drought,” Volpe said. “Right now for 95 percent of the categories of the supermarket, if prices are going up, the drought is not attributable. . . . It’s just too soon for higher commodity prices to be appearing on shelves.”
If it provides any comfort, retail food prices on average have been flat this year, the agency noted. The CPI’s so-called food-at-home or grocery category was unchanged from January to August.
Also, consumers have seen some price declines linked to the drought, but they won’t last. Beef and veal prices fell by almost half a percentage point in August, according to Volpe.
“That’s the first time they’ve fallen in a long time, in about a year and a half, and we suspect that ... [beef and hog] ranchers have been reducing their herd size ahead of the expected increases in costs of maintaining these large animals,” because of higher feed costs.