Food Prices To Spike Higher Than Inflation In Jan 2013

07.26.12 | Sarah Harnisch

The federal government is warning people to brace themselves for a food price hike next year. The USDA has confirmed for the first time that it's expecting food prices to skyrocket 5-percent next year because of the scorching heat and drought conditions in half the country. Prepare to pay more for beef, pork, dairy and eggs. It could add 500 dollars a year more to the budget of a family of four.

Milk, eggs, beef, poultry and pork prices will all be affected because the drought has pushed up prices for feed, and that will eventually translate into higher prices for steaks, hamburger, pork chops and chicken. The good news for cost-conscious consumers is that prices for fruits and vegetables, as well as processed foods, aren’t affected as much by the drought.

But beef prices as a whole are expected to see the biggest jump at 4 percent to 5 percent, according to the USDA.

Dairy product prices are forecast to climb 3.5 percent to 4.5 percent; poultry and egg prices are projected to rise 3 percent to 4 percent; and pork prices are expected to rise 2.5 percent to 3.5 percent in 2013, the agency said.

Normal grocery price inflation is about 2.8 percent a year, so even a 3 percent increase is slightly higher than usual. The USDA kept its projected food price increase for 2012 steady at 2.5 percent to 3.5 percent, saying average retail food prices were flat for the first half of 2012 thanks to unusually low fruit and vegetable prices as well as lower prices for milk and pork.

Poultry prices will be the first to rise because chickens and turkeys need only a few months to grow to market size. Beef and pork take longer, and the agency actually revised its beef price projection for 2012 downward because producers are sending more cattle to the market as they reduce their herds in response to the drought.

Milk prices for consumers will rise by 10 percent or more, and the USDA expects those prices to stay high into next year until herds start to recover.