Over the last couple of days, Agriculture Secretary Tom Vilsack has been warning Americans to be aware of potential food price gouging from stores taking advantage of the historic drought. According to the National Climatic Data Center’s most recent monthly drought report, 55 percent of the country was in a moderate to extreme drought at the end of June, …and “topsoil has dried out and crops, pastures, and rangeland have deteriorated at a rate rarely seen in the last 18 years.” Commodity prices such as corn and soybeans have already been rising as a result; however, according to the Secretary, no immediate food price increases should be found in your grocery store – these increases will come later this year or early next year. The Secretary warned:
If in fact people are beginning to see food price increases now, it is not in any way, shape or form related to the drought, and we should be very careful to keep an eye on that to make sure that people don’t take advantage of a very difficult and painful situation… The important thing right now is for consumers to be aware… [any] dramatic increase [in food prices they see], if someone says, ‘it’s the drought,’ they should push back.
Although the Secretary may be correct that the food price increases caused by the drought should not yet be felt at grocery stores, food price increases (as well as other commodities, goods, and services) may rise for other reasons that government officials are less quick to announce: INFLATION. A recent blog found here summarizes the Fed’s unconventional monetary policies that have occurred since the “Great Recession” and are likely to put upward pressure on prices. Similarly, another recent blog found here displays graphically the Fed’s unchartered territory with its own data. If consumers see an increase in food prices and question the cause, it may be that grocery store owners can fairly point their finger back toward the Fed.