Beef, poultry and milk are among food items affected by drought

Monday, July 30, 2012
Butcher Kenny Klipfel stands in the meat cooler with cow halves waiting to be butchered Thursday at Fruitland American Meat. (Laura Simon)

As the worst drought in the Midwest in more than 50 years tightens its grip, consumers should prepare to start paying more at the grocery store.

Prices for beef, poultry and milk are all projected to go up.

Last week the U.S. Department of Agriculture released its latest food price outlook, estimating that the consumer price index for beef will increase 3.5 to 4.5 percent this year and another 3 to 4 percent in 2013.

The drought has destroyed corn and soybean crops and sent prices surging, increasing feed prices to the point that many farmers are choosing to sell their entire herds.

Peter Whisnant, owner of Fruitland American Meat, whose family has raised cattle in Southeast Missouri for generations, said he's never seen anything like this drought. Southeast Missouri is now in the most severe category on the U.S. Drought Monitor: exceptional drought.

"We've had such a light winter and a dry spring, nobody got to make hay. It's been so hot, we've run out of pasture and we've run out of water. There's just nothing out there," Whisnant said.

Klipfel weighs a rib eye steak for pricing Thursday at Fruitland American Meat. (Laura Simon)

In the short term, this sell-off is flooding the cattle market and will temporarily hold beef prices steady or slightly lower them, Whisnant said. Feeder cattle prices have dropped 10 percent in the last month to $1.36 per pound.

"Missouri is literally selling out all of its cattle. They're leaving this part of the country, so in years to come, it will take a long time to build back up the cattle in Missouri," Whisnant said.

Come next year, people can expect beef prices to skyrocket, he said.

"It's so drastic. I don't think people who aren't in the farming business realize how drastic this drought is," he said.

Forty-five percent of the U.S. corn crop is either in poor or very poor condition, according to the USDA's latest Crop Progress Report.

Corn prices have gone up 23 percent in the past month to above $8 a bushel last week. Soybean prices have jumped 12 percent in the past month, getting up to $17.50 a bushel, according to the Chicago Board of Trade. The full effect of the increase in corn prices for packaged and processed foods, such as cereal, will likely take 10 to 12 months to move through to retail food prices, according to the USDA.

For now, grocery prices are holding steady, said John Townsend, co-manager at Schnucks in Cape Girardeau.

"There's going to be an impact, there's no doubt. All you have to do is look in the grocery store on the labels to see how much corn is in everything," he said. "It may be ugly."

In addition to beef prices, Townsend expects poultry and pork prices to increase, too, because the main ingredient in their feed is corn.

Butcher Kenny Klipfel weighs rib eye steaks for pricing Thursday at Fruitland American Meat. (Laura Simon)

The USDA's consumer price index for pork is expected to increase 2 to 3 percent this year and 2.5 to 3.5 percent next year. Poultry prices will go up 3.5 to 4.5 percent this year and another 3 to 4 percent in 2013.

Dairy products are forecast to rise 2 to 3 percent this year and 3.5 to 4.5 percent next year.

Prices for fruits and vegetables will go up 2 to 3 percent both this year and next, according to the USDA's consumer price index.

Townsend said the drought has already made it difficult to get good quality produce.

"We're a proud retailer who loves to do business with local farms. Eckert's Peaches, from Belleville, Ill., has been in our circular for the past two weeks, but the peaches we have are very poor. They're very small because they're heat-affected," he said.

Produce has a hard time ripening in extreme drought conditions because it can't get the moisture it needs.

"We're getting about 10 percent of what we order and the quality is very poor, but we're trying to help a local farmer stay in business by offering their product," Townsend said.

Grocers all across the country are trying to find ways to reduce their operating costs, in an effort to keep their prices down, he said.


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