26 Jul 2012

Worst drought in 50 years driving up US food prices

9:15 pm on 26 July 2012

Food prices in the United States are expected to rise by 3% or 4% next year because of the worst drought in more than 50 years.

A new forecast by the US Department of Agriculture says milk, eggs and meat prices will all be affected, as the dry weather has pushed up prices for animal feeds.

Corn, soybean and other commodity prices have all soared in recent weeks as fields dry out and crops wither in the heat. The drought, which is affecting much of the Midwest, is the worst since 1956.

The department's Richard Volpe says pressure on food prices will begin to build later this year.

"It's already affecting corn and soybean prices," he says, "but then it has to work its way all the way through the system into feed prices and then animal prices, then wholesale prices and then, finally, retail prices."

Normal inflation for groceries in the US is about 2.8% a year.

The drought is not expected to affect fruit and vegetable prices because most of those crops are irrigated.

Mr Volpe says 2012 had originally been forecast to produce a record corn yield. Now 1369 counties in 31 states have been designated for disaster aid.

There are fears that rising US prices will have an impact further afield, as the country is the world's largest exporter of corn, soybeans and wheat.