NEW YORK — The severe drought that has damaged corn and soybean crops in the Midwest may lead to a “modest and gradual uptick” in food inflation next year, according to Deborah Weinswig, an analyst at Citigroup.
In a conference call with investors hosted by Citigroup, Lance Girard, a former supply chain manager at Supervalu, said that it was too soon to project significant inflation as a result of the drought, which has been called the worst since the 1950s. He said additional rainfall, combined with strong yields in some parts of the country that have not yet reached the peak of the harvest, such as Wisconsin, could minimize the impact of the early crop losses in the heart of Midwest.
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Some projections of rain last week were encouraging, he said.
“We are encouraged by the turn in weather; however, the drought’s impact will not be better known until later this month, and the full impact not until at least September,” Weinswig said.
Girard said he expected vendors to absorb some of the cost increases driven by the drought. The soybean crop is particularly critical, he noted, since soybean oil is used in so many products.
He also said does not expect an early slaughter of cattle herds to have a significant impact on prices, and Weinswig noted that Kroger has projected beef-price deflation this year.
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