USDA: Higher food prices won't arrive until 2013.

USDA forecasts that food prices may rise by 3-4% next year. We have an audio report from USDA's Gary Crawford.

Compiled by staff

Published: Jul 25, 2012

Consumers won't feel the impact of higher food prices caused by this summer's drought until 2013, the government said Wednesday.

USDA left its inflation forecast for all food in 2012 unchanged at 2.5% to 3.5% in a monthly report. In its first forecast for 2013, the USDA projected the price of all food will climb 3% to 4%.

However, USDA said the effect on food prices won't be clear until it is clear how severe the drought has been.

The USDA actually lowered its price inflation outlook for beef and veal in 2012 to 3.5% to 4.5%, down one-half of a percentage point, noting the drought is causing ranchers to liquidate herds, increasing the short-term beef supply.

The USDA raised its 2012 inflation forecast for poultry to 3.5% to 4.5%, and increased its forecast for fats and oils to 4% to 5%, both up one-half of a percentage point. It left other projections unchanged.

The drought's impact on meat prices could potentially be felt later in 2012, while the impact on packaged and processed foods will take 10 to 12 months to filter down to consumers, the USDA said.

"We are expecting most of the drought impacts to hit in 2013," Richard Volpe, a USDA economist who oversees the report, said in an interview.

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