Weather has been a big story this year as a dry, hot summer has left farmers worried about their crops. According to a recent story by Reuters, grain analysts expect the U.S. corn crop to be the smallest in six years and about 14 percent lower than the most recent forecasts made by government economists.
Soybeans that are planted later in the year are less affected by the weather, but analysts are still expecting to see the smallest crop for those in four years, too. Wheat will also be impacted, as evidenced by soaring grain prices in the futures markets. Some experts predict that relief will come in about six months, when farmers in South America harvest the crops they are planting now.
How this year’s inflated prices for crops impact you
Higher prices for grains seem inevitable for this year since the agricultural experts agree that rain will not be able to save much of the crop at this point. That means consumers are likely to see higher food prices and we should expect to see prices rise for at least the next several months.
The impact on family budgets is expected to cost about $75 more per person over the next year. That is the estimate offered on CNBC by the CEO of Cargill, one of the largest grain companies in the world. If there is any good news in this story it is that the Federal Reserve expects overall inflation to remain subdued and total less than 2 percent.
Low inflation in the face of rising food prices is probably the result of consumer cutbacks in other areas. Food is a necessity, so increased spending on food usually lowers spending on discretionary items like eating out or other entertainment expenses. Economists can point to low inflation rates, but consumers have to cut back their spending to meet the expenses of food, utilities, gas and health care.
Retirees are especially vulnerable to food price increases. That $75 per person amounts to $150 per couple that can no longer be spent on something else. In addition to food, health care costs continue to rise and these are among the largest expenses that senior citizens face.
You can not ignore inflation in your life just because the economists say it is temporary or confined to a small number of goods. Retirees often rely on fixed incomes – meaning even small gains in food prices requires re-budgeting priorities. A reverse mortgage might be the best way for you to add to flexibility to your financial plans and enjoy some security against rising prices in retirement.