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July 26, 2012

Drought seen as driving up food prices

The U.S. has been experiencing the worst drought in nearly half a century, bringing up prices on meat and dairy. (Ian Wagreich UPI)

WASHINGTON (UPI) -- Prices of milk, beef and port may rise next year due to the worst U.S. drought in nearly a half-century, federal officials said Wednesday.

Farmers already are seeing some price rise in feed corn, and poultry prices are expected to rise more quickly -- consumer price indexes for chicken and turkey are expected to rise 3.5 percent to 4.5 percent this year, The New York Times reported.

"The poultry category is the smallest animal category, and we expect to see more of an effect this year because they grow the fastest and will be first to be impacted by higher feed prices," Richard Volpe, an economist with the U.S. Department of Agriculture, told the newspaper.

The Times said department figures released Wednesday indicate the largest percentage increase next year is expected for beef, a rise of 4 percent to 5 percent, while the price of dairy products is expected to increase 3.5 percent to 4.5 percent.

The report indicates an increase in egg prices by 3 percent to 4 percent, while pork is expected to rise 2.5 percent to 3.5 percent.

The Times said food prices overall are expected to rise about 1 percent for every 50 percent increase in corn prices -- the USDA says corn is used in dozens of products, from soft drinks to baby food, and nearly half of the crop is used to feed livestock.

Livestock operations "are very corn-intensive operations," Bruce A. Babcock, an agriculture economist at Iowa State University, told the newspaper. "So customers will see an increase in the prices they pay for beef and dairy as the price of feed rises because of a drop in production."

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