The U.S. drought will soon take its toll on food prices. Analysts with Great American Group, LLC, believe the higher prices will extend into 2013 because of the impact of drought on the corn supply. The higher cost of feed will severely impact the meat and dairy industries.
“The drought has caused a state of alarm in the food industry,” said Ken Bloore, chief operating officer of Great American Group’s Advisory & Valuation Services Division. “A continued lack of rain in the U.S. will be detrimental to crop development. This will result in a tightened supply and higher prices for raw materials, livestock, feed and crops, which could impact gross margins for companies throughout the industry.”
The drought has affected nearly 60 percent of the continental U.S., which is the largest drought in the U.S. since the 1930s and 1950s.
According to U.S. Department of Agriculture estimates, overall food prices are expected to increase 2.5 to 3.5 percent through year-end, with increases expected in all categories. Grocery store prices are on track to increase between 2.5 and 3.5 percent as well, while restaurant prices are predicted to rise by 2 to 3 percent. Any increases could be magnified if the drought continues for an extended period, the report said.
With cows starving from lack of pasture and farmers now faced with the additional challenge of increased corn prices, the meat and dairy markets will be particularly impacted. Since corn is a primary food source for cattle, there is great concern that farmers will be unable to maintain their animals in the coming months.
Great American Group, LLC, is a leading provider of asset disposition solutions and valuation and appraisal services to a wide range of retail, wholesale and industrial clients, as well as lenders, capital providers, private equity investors and professional service firms.