Which foods will cost more?
Blame it on the weather: severe droughts throughout parts of the U.S., Canada and Eastern Europe are starting to affect our wallets. Experts are already predicting an overall price increase from 2.5 to 4 per cent through 2013 — that’s well above current inflation (1.7 per cent) and a jump above the 2.1 per cent rise in prices we saw from August 2011 to July 2012, according to the Consumer Price Index.
We know it’s coming, but where can we expect to feel the pinch? Here’s a quick look at some of the foods set to give us sticker shock into next year.
Corn and corn products
If the pictures of parched fields weren’t sobering enough, the World Bank Group’s latest Food Price Watch report says corn prices have risen 25 per cent this summer.
If you’re thinking, “No problem, I don’t eat much corn”, remember we’re not just talking about the ears. Corn is a staple food in many countries and an ingredient in many products we enjoy — such as popcorn, tortillas, tamales, corn chips, corn bread and corn-based cereals. Corn oil is also a common ingredient in cooking and baking.
Then there are the foods where you might not expect to find corn — like soft drinks. Surprised? The main ingredient is high fructose corn syrup. In fact, corn syrup is a common ingredient in many food items including baked goods, breads and cereals.
In North America, we hear a lot about corn — but wheat crops have suffered in some of the world’s other main producers. The World Bank says wheat prices have made a 25 per cent increase. That may be good news for Canadian farmers as their crops may be worth more on world markets.
At the grocery store, we’ll all feel the pinch on many of our staple foods from bread to cereals. Like corn, wheat and gluten are common ingredients in many foods. Be prepared for a ripple effect!
Soybean crops — and prices — haven’t been hit as hard as other staples, but the World Bank still reports a 17 per cent jump in costs in recent months. Soybeans have many uses, especially as a source of protein and alternatives to meat including soy milk, soy flour, soy protein and tofu. Soybean oil is also used in cooking, baking and salad dressings — plus it’s a main ingredient in margarine. Some foods such as tuna and sardines are packed in soybean oil.
Some meat and animal products
Humans aren’t the only ones who consume corn and soybeans — these foods are processed into livestock feed. Experts warn it’s going to be more expensive for farmers to raise animals, which will lead to increased prices for meats such as beef and pork. Some predictions say farmers may even cut back their herds to save money. If that’s the case, decreased supply will also fuel price hikes — which some experts warn could be higher than the predicted 4 per cent.
However, there is one staple that hasn’t been affected by this summer’s droughts: rice. Experts say the world has a good supply of this grain, and prices have even decreased by about 4 per cent in recent months.
Who will price increases affect most?
No one likes to see food prices go up, but many people are able to absorb the additional cost into their budgets. However, experts worry about people who can’t afford to accommodate the new costs — such as those living on a fixed income or low-income families. Even people with decent jobs may feel the pinch as their salaries fail to keep up with rising costs.
Worse yet, the World Bank is already warning that food price hikes could have devastating effects on people in developing countries.
“Food prices rose again sharply threatening the health and well-being of millions of people,” said World Bank Group President Jim Yong Kim. “Africa and the Middle East are particularly vulnerable, but so are people in other countries where the prices of grains have gone up abruptly.”
The World Bank Group is calling on countries to strengthen programs to ensure their poorest citizens don’t face additional economic hardship.
What about the future?
How will one bad year shape the future of food prices? We wish we could report that prices will recover along with crops, but the World Bank Group doesn’t see that happening. According to the report, prices will “remain high and volatile” in the future. No one knows what future supplies will be like, but we do know an ever-growing population will create more demand — and the food system may not be able to respond in kind.
It’s important to remember that predictions aren’t guarantees. Like other aspects of the economy, food prices are influenced by a number of interconnected factors. No one knows for sure how much individual food prices will increase or what the overall effect on food costs will be. The best we can do is be prepared for change.
Additional sources: BBC News, Reuters, Yahoo News, the UK Guardian