The worst drought to hit U.S. cropland in more than half a century could soon leave Americans reaching deeper into their pockets to fund a luxury that people in few other countries enjoy: affordable meat.
Drought-decimated fields have pushed grain prices sky high, and the rising feed costs have prompted some livestock producers to liquidate their herds. This is expected to shrink the long-term U.S. supply of meat and force up prices at the meat counter.
The U.S. Department of Agriculture expects beef and veal prices to rise as much as 4.5 percent this year, and as much as 5 percent in 2013. Pork products could jump by up to 3 percent this year, and as much as 3.5 percent next year.
At a time when high unemployment and rising gasoline prices have U.S. consumers flinching, any rise in grocery bills could chill discretionary spending of the middle class, placing a further drag on the economy.
It'll put a hardship on people who are already suffering, said Bob Goldin, executive vice president at food industry consulting firm Technomic. For most other consumers, it'll be an added burden to their finances.
Food prices in 2013 are expected to grow faster than normal for the fourth time in seven years. A recent forecast from the USDA has food costs jumping as much as 4 percent.
Historically, food in the United States has been cheap compared to what people spend other countries. In 2010, Americans spent just 9.4 percent of their disposable income on food, according research by USDA's Economic Research Service (ERS).
The total economic impact of the drought – along with a federal regulation that requires gasoline to contain ethanol made from corn – could be as much as $30 billion including ripple effects to the agricultural economy and elsewhere, estimated Bill Lapp, president of Advanced Economics Solutions, an economic research firm that studies the food industry.
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The first bite to consumers' wallets will likely arrive by Halloween at the end of October, with certain cuts of chicken and other products derived from livestock that rely heavily on corn for feed, said Ricky Volpe, research economist with USDA's Economic Research Service.
As Americans begin to prepare for holiday baking, the price of milk and eggs is also expected to rise. By 2013, nearly every aisle in the grocery store will see an uptick in pricing, Volpe said.
“Are consumers going to feel this? Of course,” Volpe said.
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