Inflation is likely to push food prices at the grocery store up 3% to 4% in the coming year, Joseph Glauber said at the 2013 USDA Agricultural Outlook Forum in Arlington, Va. But if rain comes, supplies will increase, and eventually that will mean lower prices for consumers.
"The outlook for 2013 in a nutshell is we're expecting a rebound in yield," Glauber said. "We should see record production in corn and soy, which will mean improved profits for livestock, dairy and poultry."
Spring rains will be "very critical" to how well U.S. farmers do in the growing season, he said. He said there's no reason to expect another dry year and projected a "dramatic rebound" for the corn crop. Because of the drought, the corn crop of 10.7 billion bushels was 4 billion bushels short of projections.
Better weather should mean lower prices for crops such as corn, soybeans and wheat, which would mean lower production costs for meat, poultry and dairy because feed would be cheaper.
It will still take time for the national cattle herd to build up.
"We lost 3.4 million head in Kansas, Oklahoma and Texas alone" in 2012, Glauber said. A drought in Texas two years ago and this summer's national drought were especially tough on cattle ranchers.
The National Weather Service is anticipating a warm spring and summer, not the baking heat of last year.
If corn prices drop from the current $7.50 a bushel to about $5, as Glauber predicts, products with sweeteners in them could start to see prices flatten and possibly drop, said Chris Hurt, an agricultural economist at Purdue University in West Lafayette, Ind.
Meat and dairy product prices could take longer to decline. The first would be chicken, because chickens grow quickly. Poultry producers might start to increase production in late summer, meaning chicken prices could flatten and possibly decrease around Christmas, Hurt said.
Pork would be next, but not until the second half of 2014, because it takes longer for pigs to grow to market weight, he said. Beef has the longest production cycle, "so if ranchers start expansion this summer, it wouldn't be until 2016 that we would see more beef in grocery stores."
The real question in farmers' minds is whether they've just gone through a few bad years or was that a new normal, Hurt said.
"A year ago, the farmers said, 'We've had two bad crops in a row. What are the odds we'll have another?' " he said. "But now we've had three, and people are starting to say, 'Maybe we're in a new cycle.' "
Elizabeth Weise, USA TODAY