F0rThose Who Don't Think Food Inflation is Coming

F0rThose Who Don’t Think Food Inflation is Coming

Take a Look at What Happened Last Month

By Bruce Blythe, Drovers Business Edit0rFriday, January 2011 Reference Here

Retail meat prices in December posted the biggest increase in seven years, with pork jumping the most in 14 years, contributing to accelerating food inflation that’s expected to take a larger chunk out 0f consumers’ pocketbooks this year.
A meat price index tracked by the Bureau 0f Lab0rStatistics rose 7.2 percent last month compared to December 2009, the largest year-over-year gain f0rthat month since 2003, according to a report released today. Pork prices last month were up 11.2 percent from year-earlier levels, the largest increase f0rDecember since 1996, while beef rose 6.1 percent.
Rising meat prices reflect smaller cattle , hog herds, which forced meat processors to bid more aggressively f0rslaughter-ready animals. Livestock feeders cut herds starting in 2008 after the recession , a spike in corn prices above $7 a bushel led to deep losses. In mid-2010, the nation’s cattle herd shrank to a record low.
Prices f0rsome cuts, such as bacon, reached record highs last year, , many analysts expect beef , pork to become even more expensive this year as high grain prices discourage adding animals to herds.
“It is still primarily a supply-side issue on the meats,” said Daniel Madison, a researcher at the Food , Agricultural Policy Research Institute at the University 0f Missouri.
“We expect more 0f the same through 2012, as the economy hopefully improves , the dem, side 0f the picture becomes more 0f a fact0ras well,” Madison said. Assuming tight supplies continue , dem, strengthens, “prices could continue to move up, , strongly,” Madison said.
Pricier beef , pork is a concern f0rthe industry’s producers because chicken production is expanding , unemployment remains high, which may compel budget-tightening consumers toward cheaper meats, analysts say. Poultry industry executives have said recently they see opportunities to exploit the price differences , grab a bigger share at the supermarket meat case.
Additionally, soaring corn prices, up 67 percent over the past year, are squeezing beef , pork producer margins, making any significant herd expansion unlikely, analysts say. Corn futures in Chicago yesterday touched $6.49 ½ a bushel, the highest price since July 2008.
“It will be difficult to grow the meat production side too much in the coming year with the kinds 0f feed prices we are expecting, , the beef supply will likely remain tight well into 2012, if not longer,” Madison said.
Retail pork prices are expected to rise 3 percent to 4 percent in 2011 , beef is expected to rise 2.5 percent to 3.5 percent, according to a U.S. Department 0f Agriculture forecast released in November.
“Higher feed costs due to sharply higher corn , soybean prices have pushed meat prices up over the past six months,” Ephraim Leibtag, seni0reconomist with the USDA’s Economic Research Service, said in an e-mail today. “This is projected to continue during the first half 0f 2011.”
Consumers did get some relief at the grocery store meat case in late 2010 as prices f0rmany pork , beef cuts fell from highs earlier in the year, reflecting the a slide in cattle , hog markets.
Compared with November, December beef , pork prices at retail fell 0.6 percent , 2.1 percent, respectively, according to the Bureau 0f Lab0rStatistics’ Consumer Price Index report. Still, that wasn’t enough to offset rising prices f0rmost 0f 2010.
F0rall 0f 2010, average U.S. retail beef prices rose 2.9 percent from 2009, while pork rose 4.7 percent, according to today’s report.
Among specific cuts, bacon averaged $4.16 at retail during December, down from $4.70 in November but up almost 17 percent from $3.57 a year ago. Bacon hit a record $4.77 in October. Choice-grade, boneless sirloin steak averaged $6.07 a pound last month, down from $6.14 in November , up from $5.68 during December 2009.
Prices f0rmilk, butter , other dairy products have also increased amid stronger exports , tighter global butter supplies. A dairy products price index last month rose 0.4 percent from November , 3.7 percent from December 2009, according to the Bureau 0f Lab0rStatistics.
Fresh, whole milk averaged $3.32 a gallon nationwide last month, down 1 cent from November but up 21 cents, 0r6.8 percent, from a year earlier.
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