Drought could affect food prices this year and next


Issue Date: March 19, 2014
By Ching Lee

With hundreds of thousands of acres of farmland expected to be left unplanted this year due to water shortages, market analysts and economists say shoppers will likely begin to see higher prices on some food items later this year. And they warned additional impact would come next year, if the state does not get sufficient rains this fall and winter.

Sean Villa, president of Great West Produce, a produce broker in Los Angeles County, said he expects a number of products to be affected later this year, including broccoli, sweet corn and melons from growing regions in Fresno, Mendota and Huron, where farmers will likely cut acreage due to water shortages.

Supplies of other items may be supplemented from other growing regions, but at a higher cost. For example, buyers may have to rely more heavily on Florida and Mexico for corn, and there may be more melons coming from Mexico and even offshore, Villa said.

Gary Tanimura, a vegetable grower based in the Salinas Valley, said he will have to reduce his summer melon production in the San Joaquin Valley by about 20 percent due to lack of water. He's in the process of digging wells there, but he said he's not sure how soon they will be online.

Tanimura said spring and fall lettuce production in the San Joaquin Valley also could drop by 25 percent to 30 percent this year, although growers could try to make up some of that by extending the planting season in the desert and in the Salinas Valley.

Bill McClain, a buyer for Los Angeles-based West Center Produce, a wholesaler that supplies mostly to restaurants, said he expects his clients may have to pay more for produce this year. If there is not enough local supply, he said he could be looking to Florida, Texas, Mexico and other growing regions in the Southern Hemisphere.

Cindy Jewell, director of marketing for California Giant Berry Farms in Watsonville, said farms in the Oxnard growing region—which typically plant a second crop in the summer for fall production—may not be able to do that this year.

"If the water situation continues to be this severe, there may not be as many of those acres replanted for fall production," she said, adding that if the drought continues into fall and winter, when most strawberries are planted, it could affect what's planted for next year's harvest.

Because California supplies nearly 90 percent of the nation's strawberries, Jewell said it is not likely that there will be much of a production shift to other regions.

"It's not like someone else could step in and do that," she said. "It's all about climate and location."

On the beef market, the California drought may have the most impact on niche products such as grassfed, organic or natural beef, said Lance Zimmerman, a market analyst for Colorado-based Cattlefax. Those programs typically rely more on local or semi-regional supplies, he said, noting that the size and scope of the supplier will influence how they react with price increases.

Retail beef prices have risen nationwide, Zimmerman said, because of improved demand and continued declines in supply caused by several years of drought in other major beef-producing regions in the Southern Plains and the Southeast. He said the California drought will actually push more product into the market initially, as pastures and feed supplies dry up and ranchers reduce their herds.

In states where drought conditions have improved, ranchers are now trying to build back their herds, so they're not sending as many animals to market, particularly mature cows, and that has driven up prices on meat cuts such as chuck roast and ground beef, he added.

Malorie Bankhead, spokeswoman for the California Cattlemen's Association, said some California ranchers are sending their cattle out of state, and those animals will still end up in the U.S. supply chain.

The farmgate milk price has edged up a bit, mainly in response to international demand that has kept California milk supplies tight. Leslie "Bees" Butler, a University of California dairy economist, says higher prices may limit any record-breaking volumes of dairy exports, leaving additional supply for the domestic market and tempering the price impact related to drought.

Any further increase will be in the range of 25 to 40 cents per gallon at the store, he added.

On the produce market, fair weather accompanying the drought has, for now, caused vegetable crops to come to market ahead of schedule, creating an overlap of products from the desert region and the San Joaquin Valley. That, combined with reduced demand from East Coast markets due to severe winter weather, has led to temporary oversupplies of some vegetables, Tanimura said, while Jewell reported that berry production has also been stimulated by warm winter weather.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.