The heat wave that scorched much of the U.S. for the last month was brutal. But there’s more pain to come, this time in the form of higher food prices.
By this fall, American consumers could see higher prices for beef, milk, pork, poultry and all sorts of other goods, thanks to the drought that has hit the U.S. corn-growing regions especially hard.
In a year when the U.S. Department of Agriculture was expecting a record crop, as much as 60% of the corn grown in the U.S. has experienced moderate to extreme drought conditions.
The problem stems from farmers’ reliance on corn to feed livestock. With the drought decreasing corn yields, prices per bushel have reached about $7.50, 50% higher than the expected price of $5, and 30% higher than last month. That has raised the price for ranchers, for example, who use that corn to feed livestock. The price has added $75 to $80 in additional costs per head of cattle, which could mean around a 6% increase in price for some products.
The heat wave battered some of the country’s biggest corn producing states, including Indiana, Missouri and Kentucky. Much of the region is experiencing its worst drought since 1988.
On Wednesday, the USDA said that the corn crop will average 146 bushels an acre, down 20 bushels from June estimates and even worse than many analysts had predicted. Both corn and soybean prices spiked on the USDA’s announcement.
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The corn harvest projection will still be sizable when compared with previous years. Initially, the USDA reported that farmers had planted the largest crop of corn since 1937 in anticipation of an improved economy and demand from developing countries. While the harvest projection has been lowered, it will still be one of the largest on record.
But that doesn’t mean that consumers won’t feel the pain at the grocery store. Not just corn but soybeans and wheat have been affected by the drought, and they’re found in all sorts of products, including cereals, vitamins and cooking oil.
It will take some time before the chain reaction of higher prices finally hits consumers. Not until farmers begin to harvest will they really know how much damage has been done. But considering the extent of the drought and the sorts of crops that have been affected, we should all expect to pay a little more at the supermarket by autumn.