How the Drought Will Impact Your Wallet: Expect Increases on Milk, Corn, Beef

By Laura Heller, dealnews contributor

The rains have finally come to the Midwest, but for many farmers it's too little, too late to save their crops — and the result will in turn be higher prices at the grocery store.

The USDA issued a report last week addressing how extended drought and heat in the Midwest could affect food prices. It won't be immediate (many of the increases won't be felt until next year), but beginning this fall, some household staples could cost a lot more. So what should a budget-conscious consumer brace for?

Everyday Items to See Quick Price Jumps

The USDA predicts milk and dairy products will be more expensive almost immediately, as cows produce less milk due to the heat. Milk, cheese, and yogurt will all see increases, as will other things made with dairy. That also means that family pizza night could get pricier.

Beef prices, too, could go up since drought conditions will likely force farmers to reduce the size of their herds to combat their higher feed costs. However, somewhat counter-intuitively, short-term supplies of meat could actually increase before becoming more scarce; once ranchers run through their excess, future supplies and prices of cattle byproducts (such as leather) could be affected due in part to those smaller herds.

And lastly, while we're always looking forward to the rock-bottom prices of the upcoming Black Friday season, it looks like that bargain trend won't extend to the dinner table in 2012; your Thanksgiving turkey this year will be more expensive, as poultry prices are set to increase by 3.5% to 4%. Pork products cost more, too, and we can see prices rise soon as this fall, all thanks to higher feed costs. Soybeans are also in danger, but due to their different growth cycle, experts predict only a smaller — rather than decimated — soybean crop this year.

Expect Delayed Increases on Corn

If only the good news about soybeans were also true for corn; as anyone who resides in the heat-scorched Midwest can attest, it is surreal to see corn stalks only knee-high; fields gone fallow as farmers simply gave up; and soil turned to dust. Recent rains can't make up for the long stretch without, and days over 100 degrees are in record-breaking territory. As a result, corn has been most heavily hit by the drought.

Despite this year's poor harvest, don't expect prices on all corn-based products to go up immediately. Because of the way the food and manufacturing cycles work, products that use corn as an ingredient — and there are many — won't be impacted by reduced supply until next year. Nor will anyone be forced to go without corn for their end of summer BBQs. The sweet corn traditionally used for corn on the cob and other home cooking is not affected. Feed corn and commercial corn crops, on the other hand are.

Anyone who's been concerned about high-fructose corn syrup as an ingredient in packaged foods has more to worry about than nutrition. The commercial crops dying in the fields are the kinds that are used to make said syrup. As a result, prices on everything from cereal to soft drinks will be higher next year as the drought's long tail works its way through the production cycle. "The full effects of the increase in corn prices for packaged and processed foods (cereal, corn flour, etc.) will likely take 10 to 12 months to move through to retail food prices," reports the USDA.

So What's a Consumer to Do?

All this may be very disturbing, but don't panic or start hoarding corn just yet. Supermarkets may pass along higher prices to shoppers on certain perishable items, but typically the makers of consumer packaged goods are better at absorbing higher costs. As a result, those goods that are stored on shelves may only incrementally increase in price. The same is true of non-food items that contain corn products like adhesives and detergents. If costs go up, it won't be as noticeable as, say, a gallon of milk that costs 30% more.

Moreover, prices actually periodically spike on everything, from peanuts to butter and beyond, and shoppers on a budget typically can learn to make adjustments. According to earnings reports from grocery retailers, consumers are fairly adept at changing consumption patterns. (Items like milk and eggs are usually exceptions to this rule.) If products made from corn become more expensive, it could force a switch to items made from crops that aren't being affected by the drought, like wheat or other whole grains. Consumers can also consider eating less red meat and poultry, and buy more fish. Opting for more soy-based foods and fewer prepared and processed items will also help stretch many consumers's grocery budget.

Although it's difficult to efficiently shop for food deals online when you're aiming to knock all your needs out at once, there are a few affected items that you can scout out through Amazon Subscribe & Save. Cereal and detergents, for instance, are items that we see available at a discount through subscription and a temporary coupon code, which frequently result in an Editors' Choice price.

Either way though, the drought may require a few changes on your part, if you don't want to pay a premium at checkout.

Photo credits: TLC, redOrbit, and Camp Shane

Laura Heller is a freelance writer based in Chicago who specializes in mass market retail trends and consumer electronics industries. You can follow her on Twitter @lfheller.

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DealNews may be compensated by companies mentioned in this article. Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).


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