The worst drought in the United States since 1956 has torched the Midwest farm belt and only shows signs of expanding. With over half the continental U.S. in some stage of drought, more than 88% of the nation’s corn has been adversely affected.
Corn, the U.S.’s leading farm export, is not only a staple of processed food but also a key ingredient in animal feed. The USDA predicts that food prices will inevitably rise, but these price increases will vary by type of food product and when the costs will surge.
To keep rising prices from thwarting a carefully crafted family budget, we’ve come up with some ways for grocery shoppers to find the best deals. For every category of food, we’ve listed our top consumer recommendation to fight drought-induced price hikes.
Fruits and Vegetables
Now might be a good time to go healthy and turn to something ripe in the supermarket. Because fruits and vegetables are irrigated no matter what the forecast, these products have been relatively unaffected by the severe drought. The good news ends here, however.
Dairy and Eggs
Prices for milk dropped 6% last year, but they will rise in 2013. The Agriculture Department predicts a 3.5-4.5% price increase in dairy products next year as smaller supplies of corn and soybeans translate into higher feed prices for livestock. These higher costs for ranchers are eventually passed on to higher prices in the milk and cheese aisle. Eggs, as well, are expected to increase in price 3-4% in 2013.
Our advice here is to check out farmers’ markets and local co-ops for eggs, cheeses, and milk. There’s no guarantee that these prices will be lower than at supermarkets, especially as local pricing can vary considerably by region. But lower prices can be found at farmers’ markets. Local ranchers in your area may have found new and innovative ways to cut deals and keep feed prices down, anything from lowering transportation costs to using different feed mixes.
One additional possibility is that corn farmers outside the Midwest, not as severely hampered by the drought, might sell their corn high to take advantage of high national corn prices, but sell at a discount to other local ranchers with whom they have long-standing relationships. Because the drought will have raised profit margin expectations on national sales, these corn producers could temper profit margin expectations on local sales to ensure good local customer relationships for the future.
Remember that these price-increase numbers are from the USDA and reflect national trends. You can expect the 3-4% price increase in eggs in 2013 at a large supermarket, but that isn’t necessarily the case with a smaller local retailer.
In the short term, beef prices will actually take a quick dip as more ranchers are selling cattle to reduce herd size in anticipation of prohibitive feed prices in the immediate future.
This abatement will be quickly reversed, however, as beef prices are expected to make the highest jump of all impacted food prices, with 4-5% increases in 2013. Culled herds can take years to build back up to full strength, so the price of beef could very well remain high for a while, putting a damper on next year’s barbecue plans.
If you can’t cut back on beef consumption, stock up. Buying in bulk is almost always cheaper than buying small portions, and with the short-term decrease in beef prices this isn’t a bad idea. Find some room in the freezer and buy beef while the price is reasonable.
Higher feed costs due to the drought will hurt here too. Poultry prices are expected to rise faster than beef prices because chickens and turkeys only need a few months to mature to market standard size, unlike cattle. The USDA expects poultry prices to increase 3-4% in 2013.
One trick here is to buy poultry right before the sell-by date listed on the package at the grocery store. Stores often mark down poultry or meat after it’s been on the shelf for a few days, in fear of having to throw the meat away and lose out on a sale completely. Ask the butcher how soon in advance of the sell-by date his or her store usually marks down the poultry, then buy the discounted meat and cook it that evening.
While corn is an integral ingredient in many processed foods, prices for processed foods are unlikely to climb as much as for beef or dairy. This is because feed prices represent a larger share of overall production costs for beef and poultry than corn prices do for processed foods, whose production costs are dominated by marketing and transportation.
Because processed food prices aren’t likely to climb as much as other food prices, buying processed food won’t hurt as much as purchasing beef or dairy. Use the excuse of the drought, however, to skip processed foods and put locally grown fruits and vegetables on the table for the kids.
What to Do?
The pain at the checkout line is not expected to fully hit until 2013, so shoppers have some time to develop good buying habits now. The falling price of gasoline, as well, will lessen any immediate price increases because transportation and fuel costs are major elements of any grocery store or restaurant’s pricing.
Americans spend just 13% of their household budgets on food, so price increases will most likely not have an extreme ripple effect in the overall economy. But for families on tight budgets, that’s little consolation. Using grocery coupons is always a smart strategy to save money.
In general, here’s a summary of our best tips. Shop around, including at farmers’ markets, local stores, and food co-ops that you might not have considered before. These smaller producers may have found better or more flexible ways to avoid national rising feed costs for their animals. Use web tools to make this browsing faster. When you do buy from the supermarket, buy in bulk or on sale, with a careful eye out for meat discounted right before the sell-by date.