How the Heat Wave impacts food prices

Heat Wave’s Affect on Food Prices
Johnna Miller, Director of Media Development
Newsline, American Farm Bureau Federation

The heat wave broiling much of the country is not just uncomfortable, it could end up costing you more at the grocery store. American Farm Bureau Economist John Anderson explains how to AFBF’s Johnna Miller.

Miller: The past week has been a scorcher with at least 17 states hitting the 100-degree mark. While it’s no surprise that will probably mean higher electric bills to pay for additional air conditioning, it could also mean higher prices for food.

Anderson: There’s something to the story. It may take a while for it to show up and to the extent of which it shows up really depends on a lot of factors. How long does it stay hot? How dry does it get? But it’s certainly something to think about. Hot weather affects production and ultimately production affects availability and that affects price. Now there may be some fairly long lags in there, but that relationship certainly can hold.

American Farm Bureau Economist John Anderson points to what’s happening in much of Texas right now.

Anderson: Texas has been very hot. Texas really has been the epicenter of the dry weather, by some measures the worst dry period that they’ve had on record. That has a very direct impact on o production, primarily of livestock. Cattle eat grass. If it doesn’t rain, there’s no grass. If there’s no grass the cattle have to be sold. That means they’re not going to be around on down the road and so production will be reduced.

And down the road a lower supply for cattle means higher demand and most likely higher prices. But more than just livestock could be hit by the heat.

Anderson: As we talk about this right now the major crop of concern is corn. The reason we’re concerned about corn is that in a lot of country corn is entering the phase of production where pollination is taking place and at that time in the production cycle the plant is very susceptible to hot weather and so right now I think everybody who watches ag markets is really paying attention to corn because hot weather in the Midwest really does have the potential to affect the size and the quality of the corn crop.

Miller: And that corn is used for everything from corn oil to corn syrup to bourbon and tortilla chips.

Anderson: For our farmers this kind of weather is more than just an inconvenience. It’s a real challenge that they have to deal with and unfortunately it’s one that they typically get a lot of experience dealing with. We certainly wish them all the best as they do the work they have to do to get through this and keep producing the food we all need.

Miller: We have two extra actualities with AFBF Economist John Anderson. In the first extra actuality he talks about the impact of the heat on poultry and pig farmers. The cut runs 29 seconds, in 3-2-1.

Anderson: Think of poultry production and pork production. We work very hard to maintain a comfortable environment for these animals. That takes a lot of money. The hotter it is, the more it takes. On the issue of how this might affect price, well one response to that is if this continues for too long is to actually cut back on production. Maybe if you’re a poultry producer the company sends fewer birds, so that it’s easier to keep them cool. Maybe they stay out of production longer between flocks, so that you miss more of the hot weather. Those are cost-reducing strategies. They’re also production-reducing strategies.

In the second extra actuality Anderson talks about the affect of the heat on dairy cows. The cut runs 32 seconds, in 3-2-1.

Anderson: It’s particularly rough on dairy cows because they tend to be very highly-productive animals and they produce every day. At least twice a day they’re milked. Really every summer we see a reduction in production per cow because they just aren’t as productive in the hot weather. It takes more of their energy to maintain their body temperature at a cool level and that’s less energy that can be devoted to milk production by the animals. There are physiological reasons for this. So we see this every summer. And the hotter it is, the more extreme that effect is and hot weather really going all the way up into dairyland in the upper Midwest, we probably will see more of an effect this year than normal.

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