KVNO News

Drought to blame for rising food costs?

By Brandon McDermott, KVNO News

April 9th, 2014

Omaha, NE – Here in Nebraska there are three things you can be sure of – death, taxes and unpredictable weather.

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This year will be no different, at least according to David Pearson, the Service Hydrologist at the National Weather Service. Pearson said Nebraska and much of the Great Plains have been hit hard with drought the last couple of years.

Pearson pointed out that there are other reasons, beyond a lack of precipitation during the spring and summer, as to why droughts seemed to have worsened. He said a lack of appreciable snowfall during the winter months, going back at least four years, is a big reason why droughts the past couple of years have intensified.

“We’ve had some decent snows, but nothing substantial to set the tone for a good spring into summer,” Pearson said.

Pearson said while this past winter didn’t bring any meaningful precipitation, Nebraska is better off than it was a year ago.

He also said last year’s summer drought was lessened during the fall with some much needed rainfall, but since then prevailing weather patterns have led to a lack of significant precipitation and low soil moisture.

“It is really interesting to compare where we are now to where we were last year,” Pearson said. “For Nebraska there are no areas where we are in the worst drought conditions. Go back a year ago today and 75 percent of the state was in an exceptional drought, which is the worst case scenario.”

When one considers the impact of the lingering drought and the rising cost of food – it may be tempting to draw a correlation between the two. The price for a pound of ground beef rose nearly eight percent from February to March in 2014, according to a recent survey by the Bureau of Labor Statistics (BLS). The survey also shows the price of a pound of chicken went up four percent, over the same time period.

Darin Newsom, senior market analyst at Telvent DTN in Omaha, said he doesn’t think last year’s drought on the Great Plains affected food prices directly. He points to the falling prices of commodities over the past year as one reason why he doesn’t see much of a correlation. But Newsom pointed out that the drought in California did affect the prices of milk, cheese as well as produce.

Newsom noted while food prices may be rising for consumers, commodity process paid to farmers and ranchers over the last 12-18 months have fallen. He said there are other contributing factors to the rising cost of food – energy markets and transportation costs, local supply and demand and inflation that have contributed more to rising food costs.

“So you’ve got so many different strings that make up this pattern, so it is hard to pull on one and say that is going to be the key,” Newsom said.

Newsom said when taking into consideration weather projections for this year there is the possibility of a severe western drought moving eastward and causing serious trouble.

“In our discussions, we talked about the possibility of that system moving from the west and lingering,” Newsom said. “Could it spread further east than where it has so far? It’s possible. We could see this thing push past the border of the Missouri River and if so that could start to cause a little bit of concern in the markets.”

Newsom said if the anticipated drought does spread eastward then he could see the drought directly responsible for a rise in consumer food prices.

“I think it is certainly something to watch, but given the overall supply and demand situation where we stand at the beginning of April, I don’t know if we are going to be looking at the situation right now being a catalyst for higher food prices,” Newsom said. “Could it change? Absolutely, the weather is always a wild card.”

Pearson said it is pretty simple – no rain for an extended period of time will inevitably lead to havoc on the Great Plains.

“If we linger into this drought and we don’t have any moisture in the top part of the soil, we can certainly erode away the soil,” Pearson said. “The sooner we can get some appreciable rain, the better.”

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