Food prices to escalate in 2013

The U.S. fiscal cliff may affect more than your clients’ taxes.

As talks have continue to stall in Washington, there’s been growing anxiety in farm country about how failed negotiations would affect the dairy industry and, indirectly, the household budgets of consumers.

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The looming tax increases and cuts—which are threatening the U.S. economy—could also affect the farm bill, on which Congress didn’t complete action this year after it expired in September.

As such, agriculture industry leaders hope the farm legislation can be added to any final fiscal package before the end of the year. If no fiscal agreement is reached, however, the farm legislation would be left adrift and farmers could face the prospect of returning to an antiquated system for pricing milk.

“It’s going to come down to whether leadership tells them in enough time to get (the farm legislation) into a bill,” says Chandler Goule, lobbyist for the National Farmers Union.

The problem is serious enough that industry officials are considering fallback options. The likeliest would have Congress passing an extension of current farm law, which would provide a temporary fix and help avoid rising consumer prices.

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Farmers are currently shuddering at the thought of reverting to an old system, under which milk could surge to $6 a gallon.

In related news, The Toronto Star has reported food prices are expected to rise in Canada in 2013.

Guelph University’s Food Price Index 2013 says the drought in the U.S. may cause the prices of beef, pork, eggs, grain, vegetables, fruit and seafood to climb in coming months.

Read: Banks pull food-commodity ETFs

It also says people might see even more climate upheaval next year, and predicts the current markets lack adequate food reserves to safeguard against unforeseen shortages or demands.

Read more on the study.

Read: Droughts propel commodities to food-riot prices