U.S. Food Prices to Rise Due to Lingering Drought and Livestock Disease

Aug 01, 2014

According to a new report released by Euler Hermes, U.S. consumers should expect higher food prices on grocery store shelves, as drought and livestock diseases, like the pig virus known as PEDv, have resulted in tight commodity supplies.

Euler Hermes food industry expert, Umar Sheikh, calls the series of events that have lead up the phenomenon as the “perfect storm,” adding that drought, disease and the growing demand for exports, can be blamed for higher food prices.

Factors such as the current drought in California and the massive drought that occurred in the Midwest a couple of years ago, have put pressure on fruit, vegetable and meat products. “California grows about 50 per cent of the nation’s produce, and with disease of pigs in 27 different states that’s going to impact the pork supply,” he said. The U.S. cattle population is also the lowest that it has been in five decades.

Grocery store chains aren’t the only ones raising prices, restaurants are too. Fast food giants including In-N-Out Burger, hiked up prices for its hamburgers by 10 cents each, and drinks increased 5 cents, while french fry prices remained unchanged. Similarly, Chipotle Mexican Grill and Starbucks increased the prices on their menus, in the 4 to 10 per cent range.

To add to the pressure, export demands are increasing at a rapid rate. “Exports have been growing over the last several years,” Sheikh said in an interview with Farms.com. “Several countries including China, Turkey and Canada have seen about 20 per cent growth.”

In some counties exports have more than doubled, explained Sheikh, and that’s good news for U.S. growers, as it provides more market opportunities for their products, but on the flip side it has contributed to higher food prices domestically.

While Sheikh wouldn’t go so far to say that U.S. consumers should be alarmed by rising food prices, he did say that they should expect higher prices over the course of the next year.