The enormous drought scorching the central USA will almost certainly cost at least $12 billion, making it the costliest since 1988, experts said Wednesday.
"There does seem to be near-unanimous agreement from industry experts that this year's drought losses will surpass the $12 billion recorded in 2011," says meteorologist Steve Bowen of Aon Benfield, a global reinsurance firm.
The Department of Agriculture said Wednesday that food prices next year could go up by 3%-4% as a result, with beef expected to take the highest jump at 4%-5%.
About 64% of the contiguous USA is in a drought, according to last week's U.S. Drought Monitor, a federal website.
"Right now, it is difficult to say whether we end up reaching the loss levels of 1988 ($40 billion) and 1980 ($20 billion), given that it will be several months for agricultural industries to fully assess the total extent of their losses," Bowen says.
If adjusted for inflation to 2012 dollars, Bowen says, those drought losses would be $78 billion and $56 billion, based on National Climatic Data Center figures.
"If the intensity of this year's drought is prolonged throughout the rest of the summer, it may not be out of the question to experience losses that rival something seen out of those 1980s events," Bowen says.
Joseph Glauber, chief economist for the USDA, says his department won't have a clear picture of how much damage the nation's crops have sustained until a report Aug. 10. However, "it is safe to say" that this year's crop-insurance payments to farmers hit by drought will top the $10.8 billion paid last year, he says.
Paul Walker, senior meteorologist for AccuWeather, says that in many areas of the Corn Belt, rain wouldn't help because "it is getting too late in the growing season."
David Friedberg, founder and CEO of the San Francisco-based Climate Corporation, which sells insurance to farmers to supplement their federal crop insurance, estimates that yields on the 160 million acres of corn and soybeans planted in the U.S. this year will eventually be 30% lower than in a typical weather year.
"In 2013, as a result of this drought, we are looking at above-normal food-price inflation. ... Consumers are certainly going to feel it," Richard Volpe, USDA economist, says.
Normal grocery price inflation is about 2.8%, he added, so even at the low end of the projected range people will see their grocery expenses rise more than usual in 2013. The USDA kept its projected food price increase for 2012 steady at 2.5% to 3.5%.
By Doyle Rice, and Chuck Raasch