Dr. Ken Rietz
August 17, 2023
Weather affects harvest yields, which in turn affects food prices. The weather has been unusual lately, but not uniformly, even though the majority of news has focused, understandably, on the heat. This odd distribution of temperatures has had some effect on crops and therefore food prices, but not in the ways you might expect. Let’s look at this more closely.
Figure 1: US cooling degree days, weekly, from NOAA
The US weather, according to this graph, has had slightly lower temperatures than than in previous recent years, despite the roasting that portions of the US has taken, especially the West coast, the whole southern belt, and up the east coast. Yet, this will be only the eleventh warmest July this century, according to NOAA records. The weather has actually been cooler than usual in some of the Midwest. So, the effect of the heat on crops has not been too serious.
The bigger problem for crops has been rainfall. This was the forty-fifth driest July in 129 years of records. But there was a strong band of moisture from the central Great Plains to the Ohio valley to the Northeast, with most everyone else falling short of rain, actually running to serious drought conditions in the upper Midwest and the West. The important point is that the most extreme heat and drought conditions bypassed the most important growing regions of the US. Winter wheat crop is now estimated to be 11.2% above the estimates last year at this time, according to NASS. Corn harvest is expected to be the fourth-highest on record, and soybean harvest is expected to be the seventh-highest.
With this abundance of grain, you would expect food prices to drop, but that is not the case. However, it is expected to moderate from the rapid increases seen in the past few months. The USDA expects about a 3% increase overall year-over-year in food prices, down from 5.7% last year and dropping close to the normal 2%. As an extreme, egg prices have dropped 35% from their high in January 2023.