Severe Drought Will Serve Up Severe Food Bill in 2013
NEW YORK (MainStreet) -- If you thought the extreme heat was hitting you where it hurts most by raising your summer AC bill, your personal financial pain is only beginning. Just wait for the runup that is coming in food prices.
The expected food price hike is one of two key pieces of economic data tied to consumer spending power that are headed in the wrong direction. The other is the savings rate.
With the average bank checking account interest rate standing at 0.058%, and the average savings account rate at 0.090%, according to the BankingMyWay Interest Rate tracker, bank savers are being fed paltry scraps from financial institutions.
The dismal saving rate isn't news, but food prices, on the other hand, are escalating suddenly thanks to the severe drought in the Midwest.
It's a classic "save less, spend more," conundrum, similar in some respects to the anxiety that grows every time oil prices spike and a gallon tips above the $4 mark at the pump, and in this case, instead of some unforeseen geopolitical risk sending oil higher, it's an "act of god" devastating the farm crop that's going to hit the consumer.
Cutting back on road trips, or the size of your new vehicle purchase -- with apologies to the Escalade -- is one thing, but when Americans have to shell out more for basic foodstuffs like corn and wheat, it's not as if they can simply skip a meal or two, or buy smaller sized plates (though not a bad idea) to limit the financial pain.
Consumers can't seem to catch a break, and the latest data released by the U.S. Department of Agriculture on food prices is concerning:
"The drought is really going to hit food prices next year," says USDA economist Richard Volpe. "It's already affecting corn and soybean prices, 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."