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Agri-Pulse reports:

Drought, economic strains and generational transitions will continue to be hot topics for the agriculture industry in 2013, but the sector still remains one of the top strongest in the nation, noted Economic Research Service (ERS) economists during the 2013 USDA Agricultural Outlook Forum.

ERS projects the consumer food price index to increase 3-4 percent in 2013. ERS Economist Richard Volpe noted that every projection USDA makes is "contingent on drought not being a major factor" in the next year.

Currently, 54 percent of the United States is an area of moderate or worse drought. "More than anything else, this has the potential to change our outlook for 2013 and beyond," Volpe said.

While modest food price inflation is expected this year, Volpe noted that the increase will not be as dramatic as previous years with high inflation. "It's not good news, but we're not looking at any dramatic or historical spike in retail food prices," he said. "This all hinges on the drought not exacerbating the situation for planting and harvesting."

Volpe noted that one third of the corn yield lost in the 2012 drought was taken from animal feed, and with the lowest cattle herd since 1953, beef prices are guaranteed to rise. He also noted an expected rise in poultry prices, due to greater demand from consumers shifting from beef and poultry's high input costs.

Although consumers will see a difference in food prices in the supermarket this year, Volpe noted that commodity prices are 10 times more volatile than retail food prices. To compare, he explained that the oil market is just 6-7 times more volatile than retail food prices.

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