What The New USDA Baseline Forecast Means for Food Prices

On Monday, the U.S. Department of Agriculture (USDA) released its Agricultural Projections through the year 2021. These baseline projections offer a glimpse into what is likely to happen to the prices we pay at the supermarket.

After a year or more of harsh weather conditions, which drove up prices due to late plantings and damaged crops, the forecast might well bring relief at the supermarket checkout (weather permitting!). Last year, according to the USDA, there were 7 million acres of corn, soybeans and wheat that went unplanted due to the weather. They expect those acres to be planted this year.

The forecast for the corn supply may well have the most impact on our pocketbooks. The projection is 94 million acres of corn will be planted this spring -- that is the most planted since 1944, and will put corn stocks next summer at double the amount this year. The supply (and price) of corn has a dramatic effect on just about all foodstuffs. USDA predicts that the price will drop to $5 per bushel versus this year's average bushel price of $6.20. The record high hit last summer at a fraction below $8 per bushel. Corn is used for everything from livestock feed, sweeteners, packaging and of course, ethanol -- and many blame the short supply over the past couple of years as fueling the dramatic increases we have all weathered.

That's the good news. Here's the bad.

USDA predicts that there will be a decline in broiler (poultry) supply this year -- which certainly means prices will rise. Although they do suggest that after this year, supplies will grow. The supply of beef will also decline for the next two years (yup, more price increases) but in 2017 we should see a record level of supply (and prices will then fall, hopefully). But there is one other variable -- just how much beef and poultry will we eat as prices rise? Between 2004 and 2007, our combined per capita consumption of these two foods peaked at just over 221 pounds. USDA predicts that in 2013 that number will fall to 198 pounds, and then begin to grow again.

We have to wonder that with the current economic climate if shoppers will find replacement proteins that are less expensive, and then, as the economy rebounds stay with those rather than switching back to the more expensive beef and poultry. Since the recession, most of us have changed our food shopping behaviors. We are shopping with lists, coupons, frequent shopping cards and even shopping at non-traditional outlets for our foods -- places like dollar stores and outlets. As prices have risen we are now searching for ways to save even more. I see more people using smaller pieces of beef, chicken and pork on their plates and filling the rest of the plate with vegetables and grains; which by the way, is just what the Dietary Guidelines recommend -- so perhaps the outcome is that we not only save money but also eat healthier.

With continued pressure on the economy more men and women will be choosing to eat at home to save money, which has happened before -- but this time around expect a twist. Think of it as Xtreme Home Cooking where, following the lead of Extreme Couponers, these everyday cooks pride themselves on making the most for the least. Campaigns like Slow Food USA's $5 meal challenge paved the way for a new series of recipes that put the focus on price and taste over convenience. Look for food groups to form that cook together, crowd sourcing in the kitchen if you will, with the same primary focus on cost -- shopping, cooking, eating and storing leftovers in bulk.

So what can we do? Take a look at some of my tips to save on the Shopping Smart info graphic; and hope that you will add your own money saving tips to the comments area below.

The USDA will update their forecast at the USDA Agricultural Outlook Forum held in Washington D.C. on February 23, 2012.