If you watch the news, you’ve probably heard stories about how the devastating U.S. drought, a drought that caused billions of dollars in damage to Texas crops last year, will cause you to pay more at the grocery store. The stories make it seem as though you’ll shell out a whole lot more on your next shopping trip, due directly to crop shortages from parched lands. The truth is livestock and crop prices only make up about 14 percent of the total food cost to the consumer, according to USDA figures.
Forecasts show about a 3 percent increase this year and next about average. And, notice the footnote under the graphic. Even if the price of crops doubled, we would only pay about 14 percent more for our food.
So where does 86 percent of the food cost go? That “everything else” category affects food prices more than six times as much as commodity prices. Fuel, transportation and energy costs are nearly half of the shelf price. Packaging, marketing and other steps in the chain make up a good chunk of the rest.
The bottom line is food price increases can’t be blamed on the drought for now. Yes, we will eventually see an increase from shorter supply of corn, soybeans, beef and other agricultural products. But many believe these increases won’t be felt until early next year.
If you notice your grocery bill creeping higher, take a closer look at “everything else.” Shame on anyone in the production chain who is getting rich off the drought, because farmers certainly aren’t.