August 20, 2014

Consumers Concerned About Drought Causing Higher Food Prices

The U.S. Agriculture Department has forecasted that food prices are going to rise next year because of the widespread summer drought. This summer’s drought has been categorizes as severe, and is expected to destroy or damage a large portion of the corn crop throughout the country. The government said that retail price increases will begin this fall.

Prices are expected to rise on beef, pork, poultry, and dairy. Drought conditions usually lead to herd culling because feed costs rise. The prices of packaged and processed foods will also increase, but this rise should take 10 to 12 months to move to retail pricing. If the farm price of corn rises by 50 percent, then retail food prices as measured by the Consumer Price Index will increase up to 1 percent.

Last week, Agriculture Secretary Tom Vilsack announced disaster assistance for farmers and ranchers hurt by the drought. Emergency haying and grazing is being expanded on conservation land, and crop insurance companies are providing a 30 day grace period on insurance premiums for farmers this year. In addition, more than half of all counties in the United States have been declared disaster areas, making farmers who live there eligible for loans and assistance.

This news has consumers worried about their pocketbooks. Harris Interactive conducted a survey asking Americans if they are concerned about higher food prices as a result of the drought. Overall, 94% of respondents are somewhat concerned, even though only 43% said they are following news stories about the drought. Seventy percent of respondents said they would use coupons, and 48% said they would buy less expensive food items if prices do increase.

To save money, consumers also buy in bulk, eat a more vegetarian-oriented diet, add rice and noodles to stretch food, especially leftovers, and eat more one-pot dinners such as stews, soups, and pasta. Penny-pinching consumers also freeze their own food and shop at discount grocery stores.

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