California drought severity and change in Consumer Price Index (CPI)

Droughts in California are generally associated with higher retail prices for produce but the effects do not occur immediately. Price increases associated with a drought are lagged due to the time it takes for weather conditions and planting decisions to alter crop production. In 2005, following five years of drought, retail fruit prices rose 3.7 percent and retail vegetable prices increased 4 percent. Prices continued to rise in 2006, one year after drought conditions began to improve. However, it is important to keep in mind that many factors affect retail produce prices. Despite drought conditions, prices for fresh produce fell in 2009, as the 2007-09 recession reduced foreign and domestic demand for many retail food products.