If you don’t already know, the U.S. is currently in the throes of a massive drought that is being hailed as the worse in a quarter century. A heat wave that hit the entire nation resulting in record temperatures above 100 degrees affected crops from corn to wheat so badly that food prices around the entire world is expected to rise considerable, thereby pushing inflation even higher.
The FAO Food Price Index, which measures monthly price changes for a food basket of cereals, oilseeds, dairy, meat and sugar, averaged 213 points in July, up 6 percent from 201 points in June, the FAO said in its monthly update. The rise was the first increase following three months of declines. This increase was “driven mainly by a surge in grain and sugar prices, while meatand dairy prices were little changed”, the FAO said.
According to about.com’s Robert Longley, about 87 percent of the 2012 corn crop and 85 percent of the soybean crop stand to be ruined by the “extreme to exceptional” drought that has slammed more than half the country. The U.S. Agriculture Department had predicted corn yields to reach be the nation’s biggest harvest ever in the spring, when farmers planted 96.4 million acres of corn — the most since 1937. But it cut its estimate a month ago and again Friday, saying it now expects the nation to produce 10.8 billion bushels, the least since 2006. Corn is used as a benchmark for rising prices since it is used as an ingredient in everything from cosmetics to cereal, colas and candy bars.
Adding to increased pricing pressure is the USDA’s proposed purchase of as much as $170 million worth of pork, lamb, chicken and fish for national food nutrition programs, such as food banks. This move is designed to help livestock owners who are currently struggling to feed cattle or who may consider selling off their cattle early before food prices reach maximum levels. This early purchase might result in less inventory – the unintended consequence of which will be higher prices.
Even if you’re aware of what’s coming, what can you do to help your family. While I don’t advocate extreme couponing, you can employ some time tested strategies for lowering your food prices including eating less meat, taking the food stamp challenge, or cutting your discretionary spending elsewhere.