Midwest drought yet to affect local food prices

Editor’s note: This is first of a two-part look at the drought and its impact locally. Monday’s story will look at the toll higher ag prices are taking on the local dairy industry.

While some are blaming the drought in the nation’s midsection for higher food prices paid in California, those in the food industry and agriculture say that is not the case, at least not for now.

“It is too early to say the drought is affecting food prices,” said John Anderson, deputy chief economist with the American Farm Bureau which tracks food prices quarterly.
Brian Wong at Town and County Market in Porterville agreed.

“Not really, yet,” he said Thursday of any spike in food prices.

However, the warning signs are out there and some feel increases are coming for meat and poultry and milk products.

Still, Anderson said consumers will notice only minimal increases on most retail items.

Anderson said rising energy costs play a greater role in raising costs, especially in the retail food products such as potato chips and canned vegetables.

The United States Department of Agriculture in June reported that food inflation has been running at 0.8% the first half of 2012 versus 1.9% in last year’s back half, “so prices are likely headed up, not down.”

The USDA reported that almost 80% of agricultural land is experiencing drought, making the 2012 drought more extensive than any drought since the 1950s.

The American Farm Bureau reported in July that retail food prices at the supermarket declined slightly during the second quarter of 2012 with protein staples — meats, cheese, milk and eggs — showing the greatest drops in price.

According to the latest American Farm Bureau Federation Marketbasket Survey, which was done before the drought occurred, the total cost of 16 food items that can be used to prepare one or more meals was $50.91, down $1.56 or about 3% compared to the first quarter of 2012. Of the 16 items surveyed, 12 decreased and four increased in average price compared to the prior quarter.

However, everyone agrees the drought will have an impact and that it might take a while for that impact to surface.

Local dairyman Eric Borba said many dairies are shutting down, those trying to survive are sending cows to slaughter and eventually the reduction in the meat supply and the drop off in milk production will be felt at the checkout counter.

“I think we could see $5 [a gallon] milk in the near future,” he said.

Wong said he has already seen a slight increase in the price of milk.

Dana Phillips answered The Recorder’s question on Facebook that she has noticed higher costs for food.

“The cost of meat has really gone up. Chicken not as much but overall really high on red meat,” she wrote.

Prices On The Upswing

Both Anderson and Wong said food prices have steadily increased the past four or five years.

“The cost of doing business is high — insurance, energy,” said Wong. And, he added, “everything’s more expensive in California.”

The Recorder found truth to that statement. Comparing prices in Porterville to Mount Vernon, Ill, found that all of the 10 items checked were more expensive here than 2,000 miles away, including Navel oranges and milk. Oranges ran 99 cents a pound in Illinois and $1.49 a pound here and milk was 40 cents a gallon cheaper.

“Food prices are higher than they use to be,” said Anderson, but he said the last year or two that increase has moderated somewhat. “For most of this year it has been a more normal increase, somewhere around 2%,” he said.

Anderson explained that there are so many costs that go into retail food products that there is not usually one thing that causes prices to go up. He said the biggest factor is energy cost.

“So much of the cost is tied up in packaging, marketing and delivery. When they go up, they don’t go back down very fast,” he said.

Future Increases

The USDA said the ongoing drought has increased the farm price of corn and “this will in turn, affect the price of other crops, such as soybeans, and other inputs in the food supply such as animal feed. Any effect on U.S. retail food prices would depend on the severity of the drought and would begin to appear on supermarket shelves in the fall.”

“We will likely see impacts within two months for beef, pork, poultry and dairy (especially fluid milk). The full effects of the increase in corn prices for packaged and processed foods (cereal, corn flour, etc.) will likely take 10-12 months to move through to retail food prices.”

Pete McCracken of Porteville says there are many reasons for higher costs.

“It is not only the drought, which affects the supply of livestock feed and ethanol feedstocks, but the Richmond refinery fire and the Venezuelan refinery fire are going to impact fuel cost, which is a major component of food costs,” he wrote on Facebook, which prompted Carrie Lunstad Brinkley to write, “Which means we are going to pay higher prices on everything.” Sharron Broeland offered some advice.

“We have our own little garden going and we work hard as a family to only buy what we need so there is little waste. Everyone notices food prices going up a bit but we seem to cut back or find something to replace an item that has jumped too much in cost.”

Wong also had advice for shoppers. “Just shop the specials,” he suggested.

According to USDA, Americans spend just under 10 percent of their disposable annual income on food, the lowest average of any country in the world.

PRICES:

California-Porterville

Fruit
Apples-$1.99 per lb
Navel Oranges-$1.49 per lb
Nectarines-$1.49 per lb
Foster Farms Chicken-$5.99 per lb
Lay’s Potato Chips -10 and 1/2 ounces-$2.99
Kelloggs Frosted Flakes-$4.79 for 15 ounces
Wonder Bread-$1.89
Sunnyside 2% Milk-$3.89
1 dozen eggs-$1.59
Pepsi-24 count-$6.99

Illinois-Mount Vernon

Apples-$1.59 per lb
Navel Oranges-$.99 per lb
Nectarines-$1.29 per lb
Chicken-$1.99 per lb
Lay’s Potato Chips -10 and 1/2 ounces-$2.98
Kelloggs Frosted Flakes-$2.98 for 15 ounces
Wonder Bread-$1.69
Sunnyside 2% Milk-$3.49
1 dozen eggs-$1.79
Pepsi-24 count-$5.99