The U.S. Department of Agriculture (USDA) announced today that its estimate for food price inflation did not change in July. The agency still expects food prices to rise 2.5%-3.5% this year and 3%-4% next year.
Rising prices for corn and soybeans due to the extensive drought in the U.S. are expected to drive up retail food prices, but so far this year food prices have been lower on a year-over-year basis in every month. The USDA notes, “food price inflation has slowed down since 2011 and that the impact of the recent drought has yet to materialize in retail food prices.” Regarding the impact of the drought the agency said:
The severe drought in the Midwest is affecting prices for corn and soybeans as well as other field crops which should, in turn, drive up retail food prices. However, the transmission of commodity price changes into retail prices typically takes several months to occur, and most of the impact of the drought is expected to be realized in 2013.
That conclusion is the same as the conclusion expressed by many commodities analysts who also forecast higher prices later this year and into next.
The USDA notes that prices for some items, particularly beef and veal, have been rising this year. Beef prices were 6.6% higher in July than in July 2011. Cattle herds are already being culled in an effort by ranchers to avoid having to buy feed. Prices for beef and veal may slide for a while but the USDA still expects prices to be 4%-5% higher in 2013.
The USDA summary report is available here.