By: Henrique A. Buzin.
WASHINGTON — The worst
drought in the United States in nearly a half-century is expected to drive up
the price of milk, beef and pork next year, the government said Wednesday, as
consumers bear some of the brunt of the sweltering heat that is driving up
the cost of feed corn.
Poultry prices
are expected to rise more immediately, the government said in a report. It
estimated that consumer price indexes for chicken and turkey would rise 3.5 to
4.5 percent later this year.
“The poultry
category is the smallest animal category, and we expect to see more of an
effect this year because they grow the fastest and will be first to be impacted
by higher feed prices,” said Richard Volpe, an economist with the Department of
Agriculture.
Figures released
Wednesday by the department showed the largest percentage increase next year
in its price indexes is expected for beef, a rise of 4 to 5 percent. The price
of dairy products will increase 3.5 to 4.5 percent and eggs by 3 to 4 percent.
Pork is expected to rise 2.5 to 3.5 percent.
The data is the
first government estimate of how much prices could rise next year because of the drought that has gripped most of the country this
summer, producing a lower-than-expected yield in corn, soybeans and several
other commodity crops.
Corn is now
selling at about $8 a bushel — up 50 percent from its price just a month ago.
Soybeans are at a record price of almost $17 a bushel, up from $13 just two
months ago. Food prices over all rise about 1
percent for every 50 percent increase in corn prices, because corn is used in
dozens of products, according to the Agriculture Department. Corn can be found
in everything from soft drinks to baby food, but nearly half of the crop is
used to feed livestock.
“These are very
corn-intensive operations,” said Bruce A. Babcock, an agriculture economist at
Iowa State University, referring to raising livestock. “So customers will see
an increase in the prices they pay for beef and dairy as the price of feed
rises because of a drop in production.”
According to
the government, 88 percent of the corn crop this year is now affected by the
drought and 77 percent of the crop for soybeans, used in animal feed and some
dairy alternatives, is affected.
The Agriculture
Department slashed its estimate for what was supposed to be the largest corn
harvest on record. The government cut its corn yield forecast to 146 bushels an
acre for the year, the lowest corn yield since 2003; the outlook last month was
for 166 bushels. The soybean yield is projected to be 40 bushels per acre, down
from an estimate of 43.9 last month.
The most recent
crop progress report shows that just 26 percent of the nation’s corn crop is
rated either in good or excellent condition. About 45 percent of the crop is rated
very poor or poor.
Soybean
conditions remain slightly better. About 31 percent of the soybean crop is
rated good to excellent, while 35 percent is rated very poor or poor.
Because of the
dry weather, cattle farmers in a number of states have already started selling
off or culling cattle because the drought has ruined grass for grazing and the
price for corn for feed has skyrocketed.
Daniel R.
Glickman, the agriculture secretary for former President Clinton, said that as
farmers started culling or selling their herds, meat prices could fall because
of a glut of beef on the market. “So in the short term, that’s good for
customers,” Mr. Glickman said.
But the prices
of beef, pork, chicken, eggs and dairy are expected to rise significantly later
in the year, most likely around November, agriculture economists say.
Ken Colombini,
a spokesman for the National Corn Growers Association, a Washington trade group,
said that not all of the rise in food prices could be attributed to a rise in
corn prices. “A drop in corn production is a factor, but animals are under
other stresses related to the drought as well,” Mr. Colombini said.
Ray Gilmer, a
spokesman for the United Fresh Produce Association, said fruit and vegetable
producers, for the most part, were not being affected by the drought. “Most of
these operations are irrigated and the water is highly regulated so we are not
having issues with our crops,” Mr. Gilmer said.
Despite the
drought, many agriculture economists expect the farm economy to remain strong,
mainly because most farmers participate in the federal crop insurance program.
Under the
program farmers can obtain policies that cover drops in prices or yields.
In 2011, 265.7
million acres of crops were insured, with payouts of $10.8 billion because of
weather-related damage in Texas, Kansas and a few other states.
For a few lucky farmers,
there could be an upside to the drought, Mr. Babcock said. “By collecting
insurance but selling the remaining crops at the now-record prices, they could
see a larger increase in revenue then they did last year,” he said.
This text was based on information of the site: The New York Times.