Drat that Drought! It's Raising Food Prices

By Ethel Tiersky

Aug 14, 2012

This summer's drought in the continental U.S.--its present and likely future effect upon national and international food prices--has been the subject of many articles in the major news media. Let's look into the matter and find out what caused so much devastation and what we can expect in terms of the cost and the quality of various food products.

The weather in the summer of 2012:

Drought--an extended period of dry weather, especially one that's injurious to crops--has adversely affected about two-thirds of the U.S., 78% of the country's agricultural land. About 24% of the contiguous states fell into the two worst classifications of drought--extreme and exceptional. (To see the U.S. Drought Monitor map for July, click here.) Across the nation, nearly 40% of agricultural land is experiencing at least a severe drought. According to the U.S. Department of Agriculture (USDA), that makes this year's drought more extensive than any the nation has experienced since the 1950s. More than 50% of U.S. counties have been designated disaster areas by the USDA, with drought mostly to blame.

This summer, most of the nation was hit by a double whammy--too little rain and too much hot weather. July 2012 was the warmest July on record; the average temperature for the lower 48 states was 77.6° F, which was 3.3°F above the 20th century average for July. So far, 2012 has been the hottest year ever recorded in the U.S.

Food prices in July:

The Food and Agricultural Organization of the United Nations (the FAO) issues a monthly food price index, which is a measure of the monthly change in international prices of a basket of food commodities. The July FAO food price index was up 6% from June. This surge was mostly the result of a rise in grain and sugar prices and more modest increases in oils/fats.

A look at some specific foods:

Grains: Severe drought and excessive heat coming at critical stages in plant development wreaked havoc with corn in the U.S. and has caused global corn prices to rise almost 23%. According to the Associated Press, "The U.S. leads the world in exporting corn, soybeans, and wheat, and the surging prices are expected to be felt across the international marketplace."

In Illinois, a big corn-growing state, 60% of this year's corn crop is in either poor or very poor condition. Farmers have been sadly showing the media corn cobs only half-filled with rows of kernels.

Meat: According to the FAO report, meat prices declined 1.7% in July. Why? Ranchers have been sending more of their cattle to slaughter to cut their expenditures on corn-based feed. Forage for animals is also in shorter supply. Ample meat available for purchase market has caused the drop in meat prices. However, meat prices are likely to go up next year as a result of lower cattle inventories.

Sugar: A 12% rise in sugar prices was caused by extremely wet weather in Brazil, the world's largest sugar exporter.

Predictions for the Near and more distant future:

The New York Times cites the government's forecast (based upon the consumer price index for food). Its estimates are that beef prices will rise 4-5% next year with somewhat lower increases for pork, eggs, and dairy products.

We asked two of the scientists serving on this site's Advisory Board to make some predictions about the impact of the drought. Here are their responses:

Dr. Timothy Bowser: The prices of most foods will continue to be driven up as a result of the drought. Profit margins in most grocery stores and restaurants are thin, so they will be forced to pass on costs to the consumer.

The price of meat will rise because the prices of inputs are increasing. (The main inputs include feed, water, fertilizer, energy, labor, and transportation.) The farmers and processors will not be making any additional money and may actually lose more.

More intense water management systems (like irrigation and conservation) will be installed and drought-tolerant strains of grain and produce will be developed for the long term. Farming operations will continue to consolidate to reduce costs and risks.

I live in central Oklahoma. Our two main crops are beef and wheat. The wheat was harvested long before the drought impacted us, so it was mostly unaffected. Next year’s crop may be problematic if we don’t get rains to soften the soil for fall planting. Beef herds are currently shrinking because of the rising cost of grain and forage. Ranchers are concerned that they will not be able to purchase enough feed for their animals. The same is true for the dairy, pork, and chicken farmers. Pecans are another mainstay product in Oklahoma. Many pecan orchards are irrigated; those that are not will suffer from reduced yields.

Dr. Joe Regenstein: Clearly, we'll have less domestic food for humans and feed for other animals, which will put pressure on prices. If the drought is a one-year oddity, then it won't have very long-term effects. But if it is reflective of global warming, it could have dramatic effects and may highlight the need for more genetically modified products (GMOs) that are designed with greater drought and heat tolerance.

For more predictions, click here: http://www.cnbc.com/id/48606356

Comments on the drought's effect on food quality:

Dr. Bowser: Food quality may change somewhat, depending on the product, origin, and price. Grapes, for instance, may be higher quality because they are drought-tolerant and actually respond to water stress by increasing their sugar content.

Here's another positive impact of drought on food: when farmers are forced to irrigate because of drought, the result can be better crops and higher yields due to improved field conditions from irrigation. If the water is applied appropriately (e.g. drip irrigation), the net water used can be reduced (compared to natural rain events). Fertilizers (natural or chemical) can also be efficiently distributed to crops when using certain types of irrigation equipment, which may further improve crop yield and quality.

The quality of meat products will remain relatively unchanged.

Dr. Regenstein: The impact of drought on product quality is complex. It's usually negative, but sometimes it can be neutral or positive, as cited above.

Source(s):

Timothy J. Bowser, Ph.D. , Oklahoma State University, Dept. of Biosystems and Agricultural Engineering

Joe Regenstein, Ph.D., Cornell University, Dept. of Food Science

money.cnn.com "U.S. drought drives up food prices worldwide"

http://money.cnn.com/2012/08/09/news/economy/food-prices-index/index.htm

nytimes.com "Severe Drought Seen as Driving Cost of Food Up"

http://www.nytimes.com/2012/07/26/business/food-prices-to-rise-in-wake-of-severe-drought.html

droughtmonitor.unl.edu "U.S. Drought Monitor"

http://droughtmonitor.unl.edu/

cnbc.com "Drought, food prices fan fears of new crisis"

http://www.cnbc.com/id/48606356

www.fa.org "FAO FOOD PRICE INDEX"