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 per cent this year, and as much as five per cent in 2013. Pork products could jump by up to three per cent this year, and as much as 3.5 per cent 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 four per cent.
Historically, food in the United States has been cheap compared to what people spend in other countries. In 2010, Americans spent just 9.4 per cent of their disposable income on food, according to research by USDA’s Economic Research Service (ERS).
Expensive holiday meals
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.
Livestock farmers hurting
Many chicken farmers have decided to thin their flocks. Hog farmers, too, are cutting back and losing money on each animal they send to slaughter.
Some feel they have no alternative. The number of animals has built up on some farms, as producers would not move them in hot weather. Others are hurrying to market to avoid the autumn seasonal price drop.
With producers rushing to sell, processors are trying to control the flood of protein into the market to avoid driving down the price of pork and beef. By purchasing fresh meat and putting it into storage, meat processors can sit on supplies for later use.
That is creating an unexpected bounty for the public refrigerated warehousing industry, which is beginning to field sales calls.
The boomlet, though, will likely be short lived, as meat supplies dwindle and prices rise, said Tom Poe, president of Crystal Distribution Services in Waterloo, Iowa.
U.S. pork industry losing billions
Things are likely to get worse for hog farmers. In a statement released Sept. 3, Chris Hurt, University of Purdue extension economist, forecasted that some pork producers could lose as much as $60 per head by year’s end, an all-time record high.
“The hardest decision is whether I want to fight this battle,” said Bill Tentinger, 63, who has run his family’s hog farm in Le Mars, Iowa, for more than four decades.