Rabobank’s dusting off the term “agflation” as it looks ahead to 2013 food prices.

The latest report from its Food and Agribusiness Advisory Group, “Re-entering Agflation,” suggests that the dairy and animal protein industries are squarely in the crosshairs of this event, thanks to drought conditions.

In fact, Rabobank officials expect food prices to continue to rise well into the third quarter of next year.

“Unlike the staple grain shortage in 2008, this year’s scarcity will affect feed intensive crops with serious repercussions” for dairy, the report says.

How high is high? Rabobank analysts predict food prices will rise 15 percent by the middle of next year.

“Stockpiling and export bans are a distinct possibility in 2012/13, as governments seek to protect domestic consumers from increasing food prices,” the report notes. “Increased government intervention will likely encourage further increases in world commodity and food prices.” 

Rabobank expects that localized efforts to increase stockpiles will prove counterproductive at the global level, with those countries least able to pay higher prices likely to see greater moves in domestic food price inflation.

“This is a vicious circle, with governments committing to domestic stockpiling and other interventionist measures earlier than usual-recognizing the risk of being left out as exportable stocks decline further,” the analysts note. 

On top of that, Rabobank warns that global food stocks have not been replenished since 2008, leaving the market without any buffer to adverse growing conditions. Efforts by governments to rebuild stocks are likely to add to food prices and take supplies off the market at a time when they are most needed.