USDA: drought to have little impact on overall food prices

Nation's Restaurant News, Sept 19, 1988 by Ken Rankin

USDA: Drought to have little impact on overall food prices

Bad as the great drought of 1988 has been, it could have been even worse for farmers, restaurateurs, and consumers. Indeed, the way top Agriculture Department officials see the drought now, it may not even cause a ripple on the econonomic Richter Scale.

Even though pasture and range conditions this past spring and summer were the worst since records were first kept in 1921, USDA economists pointed out that "consumers will continue finding large supplies of moderately priced food."

The reason, according to the department, is that "the drought came in a year of record meat supplies and sizable stocks of most food items."

Indeed, for many agricultural products the dry conditions will have little, if any impact, federal agriculture officials contended. For example, many types of fruits and vegetables "are irrigated and will not be seriously affected by the drought," they maintained.

Although USDA experts admitted that "the quality of some items may suffer, and a fewwill be in short supply" as a result of the poor growing conditions, they are not expecting the drought to rekindle food inflation rates.

While the "prices of some foods will be higher, and consumers may change the mix of foods they consume," overall the federal forecasters are looking for retail food prices to go up no more than 3 percent to 5 percent this year--only about 1 percentage point more than they would have risen with normal weather.

But what about farmers? Aren't they taking it on the chin as a result of the severe weather conditions this past spring and summer? Many are suffering, according to the department, but many others are profiting as a result of the drought.

"Those farmers in the Northern Plains who will not harvest a spring wheat crop because fo the drought and who have no crop insurance may lose the most," officials at the department said.

But by the same token, "crop prices are rising, reflecting lower yields and reduced stocks," the officials said. "The dryness came so early in the year that much of the 1987 crop is being sold at higher prices, and fall-planted crops were not seriously affected."

Indeed, they noted, this "combination of reduced output and higher prices could result in a moderate increase in cash receipts for crops from a year earlier."

The upshot, according to the USDA: Farmer's overall "cash income will be maintained near 1987 record highs," and the great drought of 1988 "may not change the bottom line much for the farm sector as a whole."

Are foreign franchisors being prevented from competing with the U.S. fast-food restaurants because of restrictive state or federal franchise regulations? Or are American food-serve franchisors being treated unfairly by protectionist laws in force overseas?

Those are two of the questions that U.S. Trade Representative Clayton Yuetter wants answers to from the International Trade Commission. Behind his suden interest in franchising: the upcoming "Uruguay Round" of multilateral trade negotiations, which will focus at least in part on international trade in services.

In addition to franchising, the White House trade representative has asked the commission to focuc on internationalization of a number of other service industries, including accounting, engineering, construction, advertising, and tourism.

Although no public hearings have been scheduled as part of the probe, ITC stafers notedthat "interested persons are invited to submit written statements concerning the investigation" by Jan. 2, 1989.

The commission is planning to issue preliminary findings by next February and a final report "within 15 months."

More evidence that restaurateurs are rapidly developing into Congress' all-time favorite whipping boys: the new bill, sponsored by Rep. Benjamin Gillman, R-N.Y., to raise money "to combat drug trafficking, substance abuse, and other related activities."

While lowering the boom on the drug pushers is certainly a worthwhile pursuit, the problem with Gilman's bill is that he would finance this crackdown through higher taxes on wine and beer.

Like the plan which is backed by Bill Bradley, D-N.J., and Barbara Mikulski, D-Md., to subsidize child care by trimming business meal tax deductions, Gilman's proposal would place the cost burden disproportionately on the food-service industry.

Fighting drug abuse and enabling more women to join the work force are worthy objectives that could benefit society as a whole.

They should, therefore, be financed by society as a whole--not by one small segments that seems to have become a target on Capitol Hill.