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The 2012 Drought: Impact On Consumer Food Costs

Its hard to look at the harsh drought that America has experienced during the summer of 2012 and come to the conclusion that it won't have an impact at the grocery register. But the severe lack of H2O will go well beyond mealtime.

Grains & hay are coming in tighter supply, which means that the animals they help nourish will be affected and not just the crops themselves bought direct. Potentially this could affect not only the agricultural food supply but cotton and fibers (markedly from Texas). Which might well influence the price paid for clothing when all is said and done.

The consumer in all likelihood can expect higher prices paid for the following foods:
  • Diary Products: Including milk, cheeses and ice cream. Dairy cattle simple produce less milk during these times, as they consume more water.

  • Vegetables: Everything from potatoes, to corn, wheat and soybean. Noting that soy is raised for use in many products, from oils, to feedstuff to biodiesel, to soy milk. During the June/July 2012 period on the commodities market, soybean contracts hiked roughly 35% and corn spiked about 50%. Although the consumer will have to wait until harvest for the real price shock -- producers could engage in price increases for their products in the meanwhile.

  • Meats and Poultry: With the livestock food source itself coming under limits, feed accounts for about 40 to 50 percent of animal production costs according to the Department of Agriculture. And it remains to be seen how alternative feeds might perform under such extreme conditions as we've seen.

The drought could well have its influence beyond the current year and into 2013 and beyond depending on how the climate trends. One major factor, is whether the American farmer will find economic relief from the hardship in the way of emergency loans and how they will cover their losses, and extra operating costs like for watering.

Less considered, is whether some of the seed manufacturers will stand behind their product claims when it comes to drought tolerance in the face of disappearing moisture (along with whether any producer claim limits have been exceeded, etc).

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