WASHINGTON, August 24, 2012- The Consumer Price Index (CPI) USDA released today noted that the Midwestern drought is raising corn and soybean prices, but that the impact will not be seen on retail prices until 2013. The USDA’s Economic Research Service's inflation forecast for food and grocery store prices in 2012 remains unchanged from last month at 2.5 to 3.5 percent.
“The year-over-year increase in the food-at-home CPI has fallen each month so far in 2012, indicating that food price inflation has slowed down since 2011 and that the impact of the recent drought has yet to materialize in retail food prices,” according to the CPI.
Food prices in general are one percent higher than last year. Higher feed prices will continue to raise food prices for most animal-based food products in 2013, according the report today. Inflation should also be above the historical average for food categories including cereals and bakery products, the report noted.
ERS expects the drought to reduce cattle herd sizes due to high feed costs, which will increase the retail beef supply, but reduce prices in the short term. Beef prices are currently 6.6 percent above last July.
ERS reported that average retail food prices remained flat in 2012. “Unusually low” fruit and vegetable prices and decreased fluid milk and pork prices contrast with increasing 2012 prices for beef, veal, poultry, and fats and oils.
While the full extent of the drought’s effect on commodity prices is unknown, ERS noted that it will incorporate the scope of the drought into its monthly estimates.
For today’s ERS on the changes in food price indexes, 2010 through 2013, go here.
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