California’s Drought Pushes Food Prices Higher
The Golden State is in the midst of one of its worst droughts on record. Food economists are forecasting the continued rise of food prices and predicting shortages of other foods across the U.S.
Professor Timothy Richards of the W.P. Carey School of Business at Arizona State University has researched which crops are likely to be most affected and what the price boosts might be.
“You’re probably going to see the biggest produce price increases on avocados, berries, broccoli, grapes, lettuce, melons, peppers, tomatoes and packaged salads,” says Richards, the Morrison Chair at the Morrison School of Agribusiness within the W.P. Carey School. “We can expect to see the biggest percentage jumps in prices for avocados and lettuce–28% and 34%, respectively. People are the least price-sensitive when it comes to those items, and they’re more willing to pay what it takes to get them.”
Industry estimates range from a half-million to 1 million acres of agricultural land likely to be affected by the current California drought. Richards believes between 10% and 20% of the supply of certain crops could be lost, and California is the biggest national supplier of several of those crops. For avocados, the state is the only major domestic source.
According to an ASU press release, Richards used retail-sales data from the Nielsen Perishables Group, an industry analytics and consulting firm, to estimate price elasticities—how much the prices might vary—for the fruits and vegetables most likely to suffer. The most vulnerable are the crops that use the most water and simply won’t be grown, as well as those sensitive to reductions in irrigation.
He projected the following price increases due to the drought: