WASHINGTON – The Consumer Price Index (CPI) for all food gained 2.3 percent on the July 2011 level, according the US Department of Agriculture's Economic Research Service (ERS).

Beef prices climbed 0.6 percent in July and are 6.6 percent above the comparable period in 2011, ERS reported. Steak prices gained 8.9 percent and ground beef prices increased 5.8 percent.

Drought conditions are expected to reduce cattle herd sizes due to increased feed costs, according to ERS. Higher feed costs, in turn, are expected to increase the retail beef supply and slightly reduce short-term prices.

Pork prices gained 0.4 percent in July and are 1 percent below the July 2011 level. Retail prices have started to ease, following wholesale prices, but ERS said a turn-around at all stages of production is likely because of rising feed costs.

Poultry prices increased 1.2 percent in July, a 6.1 percent increase above 2011. Chicken prices advanced 5.5 percent, while other poultry prices (including turkey) gained 8.2 percent. ERS expects the poultry category to be among the first to reflect price increases spurred by the drought.

The CPI for food-at-home CPI declined 0.1 percent in July but remains 1.9 percent higher compared to July 2011. Meanwhile, the food-away-from-home (restaurant) index rose 0.2 percent in July, up 2.9 percent from last July.

ERS said year-over-year increases in the food-at-home CPI declined each month so far in 2012. While food price inflation has slowed since 2011, consumers won't feel most of the impact of the drought until 2013 because it takes several months before commodity price changes materialize in retail prices.

Based on persistent severe drought conditions and the potential impact on corn, soybeans and other field crops, ERS's said its inflation forecast for both all food and food-at-home (grocery store) prices in 2012 remains unchanged at 2.5 to 3.5 percent. However, ERS expects inflation to remain strong in 2013 for most animal-based food products due to higher feed prices.