Wednesday, January 30, 2013

Drought Effect, the worst is yet to come...

You would think after the rain we just had the last few days, how could we be in a drought? Well that rain did not even put a dent in the problem. The lack of precipitation in 2012 caused roughly 80% of the United States to experience the worst drought in 50+ years, and it is by no means over. In fact, about 61% of the nation is still under severe drought conditions.

Although it was nice to enjoy that 68-degree weather the other afternoon and to also not have to deal with snow removal and hazardous traveling conditions this year due to the lack of a significant snowfall, (hope I did not speak too soon) it will come back to bite us one way or another. Lack of rain and warmer temperatures continue as we wind our way through the seasons. The talk of drought conditions affecting food prices began late last summer, but the worst is yet to come.

The 2012 drought not only ruined crops like corn, wheat and soybean but also caused farmers to cut back on the number of livestock they raised. These commodity prices were driven so high, feeding their livestock became far too expensive to keep so many around. We have all heard of the shortage of beef, chicken and pork that is bound to happen here in 2013. The time is coming.

As if that's not enough, now comes the situations on our nation's rivers. The Mississippi River is in danger of being shut down in certain areas due to low water levels. Farm suppliers are now going to have to find alternative ways to ship their product, thus increasing costs even more. What else can this economy endure? With prices this high, consumers continue to be conservative in spending. With the demand low because of high prices, the farmers stop producing as much. The ripple effect then leads to food processors not hiring. Will it ever end? The answer is still no. Although some areas have seen relief from the drought, the impact of what happened last year is still yet to come.

Things to keep an eye on:
  • Beef will most likely begin to rise through the first half of this year. Depleted herds will start to make an impact on pricing.
  • Chicken prices will also increase due the farmers' cost increases on grain for feed.
  • Although vegetables prices actually dropped in 2012, do not expect the same in 2013. Due to situations like a California freeze, items such as lettuce and broccoli have tripled in price.
  • With all these increases, will anything not be affected? Actually this year, the predictions are that fish and other seafood inflation will not be near as much as other items.
Read the full article here.

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