Meat and dairy prices will hit record highs, contributing to the cost of food rising by around 15% next year, a report says.
Research by investment bank Rabobank said consumers should brace for a 15% rise in food prices, as farmers struggle to cope with the soaring costs of animal feed and slaughter more of their stock.
The worst drought in the US for almost a century, combined with droughts in South America and Russia, have hit the production of crops used in animal feed – such as corn and soybeans – especially hard, the report said.
As a result farmers have begun slaughtering more pigs and cattle, temporarily increasing the meat supply – but causing a steep rise in the price of meat in the long-term as production slows.
“Farmers producing meat are simply not making enough money at the moment because of the high cost of feed,” Nick Higgins, commodity analyst at Rabobank, told Sky News.
“As a result they will reduce their stock – both by slaughtering more animals and by not replacing them.”
The “mass liquidation” of animals – which Rabobank said will pick up pace in the beginning of 2013 – will contribute to food prices hitting new highs.
The cost of pork is expected to rise at the fastest pace – by 31% by the end of June next year – while beef costs could increase by up to 8%.
“This record cost of meat and dairy will combine with already-high crop prices to increase food prices by 15% by the middle of next year,” Mr Higgins added.
This would see food prices reach their highest level on record, up by 175% compared to the year 2000.
But the report stressed that the current situation is very different to the crisis of 2008 – in which food stables of the world’s developing economies, like wheat and rice, were severely affected.
The bank’s research follows official figures that showed inflation had slipped back to 2.5% in the UK – closer to the Bank of England’s inflation target of 2%
But Mr Higgins warned that next year’s food price rise could push inflation in the UK higher, and so further away from the Bank’s target.