Commodities Expert: Food Prices May Rise if Drought Continues

Monday, 21 Apr 2014 07:19 PM

By Joe Battaglia

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Weather, water policy, and global demand overtaking supply are all factors that could have Americans digging deeper into their wallets at the grocery store, according to one commodities expert.

Dan Hueber, president of Hueber Asset Management LLC and The Hueber Report, told J.D. Hayworth and John Bachman Monday on "America's Forum" on Newsmax TV that Americans have seen big produce and dairy price increases due largely to extreme drought conditions in California.

But, he said, hopefully prices have hit a plateau and will remain that way — as long as there are no more droughts in California this summer.

Story continues below video.



The state accounted for 15 percent of national receipts for crops and 7.1 percent of U.S. revenue for livestock and livestock products in 2011, according to the California Department of Food and Agriculture.

But California is also dependent on snow melt for much of the water needed to feed its 80,500 farms. Drought conditions limited this year's snowfall total, creating a bad-news situation for farmers and consumers.

"The reservoirs are at subnormal levels," Hueber said. "I mean there's nothing really coming down from the mountains to replenish that. Now, my understanding in the growers that I know that work out in California, the state ... has really good limitations on state-run or state-managed reservoirs.

"The federally managed reservoirs still do have water availability, but they have always, always had a challenging time in that state.

"I mean, a big agricultural state has certainly lifted up a big portion of our fruits and vegetables ... The government in that state really does not — I don't want to say understand agriculture — but certainly they know where the votes are and the votes are in San Francisco and Los Angeles.

"If they need water, the ag sector is going to suffer for it. Ultimately, the rest of us do as well, because if we don't get the water to produce those crops, then we all pay the price for that," Hueber said.

According to the U.S. Bureau of Labor Statistics, the price of wine — grapes are a major California commodity — has increased 81 cents per liter since 2013.

Over the same period, the price of bacon is up 64 cents per pound; the price of ground beef is up 30 cents per pound; whole milk prices have increased 24 cents per gallon; the price of chicken breast is up 24 cents per pound; and the price of eggs have gone up 14 cents per dozen.

Hueber said the best thing consumers can hope for is a rainy spring and a tepid summer in California.

"Things are probably at a peak," Hueber said of the price increases. "This has been in the news, we've seen the 10, 11 percent inflation numbers in the price of livestock, the price of wheat, the price of vegetables tending to level off right now and maybe even head back a little bit lower. So assuming we don't have further droughts this summer then maybe the worst is behind us here."

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