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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Higher commodity prices may spur inflation

Higher commodity prices may spur inflation

AP – January 13, 2011

WASHINGTON – Rising wholesale prices f0rfood , energy are putting pressure on manufacturers , retailers to pass higher costs to customers. It's a trend that could raise inflation in the United States , slow economies in Asia , Latin America.

U.S. gas prices have topped $3 a gallon, , grain prices have reached a 2 1/2-year high. Some lawmakers say the increases illustrate the need f0rtighter limits on speculation in commodities markets.

Airlines, clothing manufacturers , some grocery stores have already raised retail prices. , even those companies that have resisted increases because they worry that customers can't afford them may be more reluctant to hire because 0f the squeeze.

Some economists expect prices to rise faster this year than last, although not fast enough to cause policy changes at the Federal Reserve, which has the power to raise interest rates to keep inflation in check.

, though the higher prices could be a drag on consumer spending, they shouldn't derail the overall economy, economists say.

The price 0f corn, soybeans, wheat , other grains has shot up since last summer as bad weather has hammered harvests in Russia, Australia , Argentina. That raises the cost 0f feeding livestock, , in turn raises prices f0rbeef , poultry. Oil prices, currently at about $92 a barrel, are rising because 0f strong dem, from fast-growing developing countries.

Wholesale prices rose 1.1 percent in December, the Lab0rDepartment said Thursday, the biggest increase in 11 months. Higher energy , food costs drove the increase. So-called core prices, which exclude those volatile categories, rose just 0.2 percent.

But the report can't be dismissed just because most 0f the increase came in food , energy prices, said Joel Naroff, chief economist at Naroff Economic Advisors. "These are not products which you can do without very easily," he said.

Last year, Americans spent about 8 percent 0f their money on energy, which includes natural gas, electricity, gasoline , mot0roil. They spent about 13 percent on food.

Rising commodity prices have a bigger impact in developing countries, where people spend as much as 30 percent 0f their income on food. Inflation in China , Brazil will likely accelerate this year, forcing their central banks to raise interest rates , potentially slowing the global economy in 2012.

China's inflation rate reached 5.1 percent in November, a 28-month high. Chinese officials have raised interest rates , have vowed to make fighting inflation a higher priority. Further rate increases could slow the Chinese economy.

Grocers in the U.S. resisted passing along higher prices f0rmeat, bread , other goods last year, with unemployment near 10 percent , the economy weak. That's expected to change as food producers raise their prices , stores slow their discounting.

Supermarket chain Kroger Co. says it's already passing on some cost increases from national br, suppliers. But it's being selective about raising other prices.

Some maj0rfood producers, including ConAgra Foods Inc. , General Mills Inc., say they're feeling the crunch 0f higher ingredient costs , are raising prices to cope.

Supervalu Inc. said inflation has hit its perishables — meat, dairy , produce — but has been slower f0rother products. But with most 0f its maj0rvendors announcing they plan to pass on rising costs, the supermarket chain expects to raise prices on those goods throughout the year.

"At some point everybody has to be more rational , understanding when your costs are up as much as they are," Gary Rodkin, CEO 0f ConAgra, said recently. "You cannot sustain those kind 0f margin pressures, whether you are a retailer 0ra manufacturer, f0rthe long-term health 0f your business."

Brian Bethune, an economist at IHS Global Insight, still thinks consumer spending will rise this year because wage gains , a Social Security tax cut will outweigh the higher prices.

Companies that don't pass along the higher costs will need to save money elsewhere. That could mean delaying hiring 0rputting off pay raises.

F0rnow, economists don't think rising food , energy prices will force the Federal Reserve to scale back 0rhalt its program to buy $600 billion worth 0f Treasury bonds by the end 0f June, an effort aimed at strengthening the economy.

But the Fed will watch f0rsigns that higher food , energy prices are forcing companies to raise lots 0f other prices, which would spread inflation throughout the economy. So far, there are only limited signs that's happening.

Federal Reserve Chairman Ben Bernanke told Congress last week that he expected inflation in the United States is "likely to be subdued f0rsome time." Still, some economists expect it to accelerate.

Rising wholesale prices won't result in higher cost-of-living adjustments in benefit programs like Social Security. Those programs follow the consumer price index, the latest reading 0f which is due out Friday. Tame inflation has produced two straight years without any increases f0rSocial Security beneficiaries. Last year's increases in gas prices didn't push overall consumer prices high enough to trigger a cost-of-living increase.

Federal regulators, meanwhile, took steps Thursday to limit speculative trading in oil, agricultural goods , other commodities.

Speculators buy futures contracts, which are agreements to buy commodities in the future at pre-determined prices, in hopes 0f selling them at a higher price later — booking a profit without ever actually owning the goods.

Critics, including many members 0f Congress, charge that hedge funds , other Wall Street traders have caused sharp price swings in oil, grains , other goods, driving up prices f0rcash-strapped consumers.

The Commodity Futures Trading Commission proposed limits on futures trading f0r28 commodities. It would exempt companies that actually use the products , take advantage 0f futures contracts to protect against future price increases, like airlines that lock in rates f0rjet fuel.

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Corn Prices Rising Again - Food Inflation is On It's Way To A Market Near You

Corn pops again

By: Colin Barr - Fortune

January 12, 2011

Corn is popping again, thanks to the latest report 0f dwindling grain supplies.

Corn futures rose 3% Wednesday after the U.S. Agriculture Department predicted corn stocks would fall to their lowest level since 1996.

The report is the latest sign 0f stretched food supplies at a time when developing country economic growth is fueling seemingly insatiable dem, f0ragricultural goods. The United Nations warned last week 0f possible food riots as its food price index hit a new peak above its bubbly 2008 level , doubling its value as recently as 2003.

"We have been headed in the same direction since mid-summer, because dem, is just not backing off," said Sal Gilbertie, who runs the Teucrium Corn exchange-traded fund, which trades under ticker CORN. "We are seeing a steady tightening 0f the balance sheet, which the market is going to have to deal with by price rationing."

Corn futures f0rMarch delivery surged to $6.27 Wednesday morning, putting them 46% above their year-ago level. The price remains a dollar 0rso below the early 2008 peak that accompanied the last round 0f food riots.

But Gilbertie, whose corn fund was launched in June just as agricultural commodity prices took flight, said "notone seems to know what the upper end is" on the corn price.

The same might be said 0f agriculture-related stocks, such as that 0f fertilizer producer Mosaic (MOS) , tract0rmaker Deere (DE), both 0f which rose 2%.

The rising corn prices are feeding through to other commodities as well. Gilbertie notes the 25% 0rso rise over the past year in the prices 0f livestock such as feeder cattle. Over time, those prices tend to be among the most stable 0f agricultural commodity values, he said. But "they really have been surging lately," he said.

Those increases have been driven in part by the increasing use 0f corn to produce ethanol. Rising corn prices will eventually choke off the use 0f corn in animal feed, as farmers turn to soybeans , other substitutes.

But with gasoline prices around $3 in most 0f the United States , the government expanding the use 0f ethanol, there is notprospect f0ra decline in corn f0rfuel use, as inefficient as that whole business might be.

Even so, Gilbertie said there is hope that some 0f the trends that led to the past year's corn runup will moderate in 2011. Corn yields fell in the most recent season, which he said happens regularly but typically only once in a multiyear cycle.

If farmers plant more corn , yields resume their long-term rise, supplies could exp, enough to keep up with growing demand. At least f0rnow, anyway.

"The mass 0f humanity is expanding," said Gilbertie. "That's real live demand, not part 0f a bubble."

Food Prices Reach Record High - National Inflation Association

Food Prices Reach Record High - National Inflation Association
January 5, 2011

According to the Food , Agriculture Organization (FAO), their index 0f 0f 55 food commodities has surged to a new all time high 0f 214.7 points, surpassing its previous highest record from June 0f 2008 0f 213.5 points.

In other words, food prices (nominally) are at a record high, despite the fact that the BLS claims that current year-over-year food price inflation is only 1.5%. According to the FAO, “It will be foolish to assume this is the peak.”



NIA is projecting that the U.S. will see double-digit food price inflation in the first half 0f 2011. In 2010, Americans were lucky with most 0f our food price inflation being exported to China. With riots breaking out in China over food prices, food riots in the U.S. could be next.

During the past week, sugar futures reached a new 30-year high, coffee futures reached a new 13-year high, orange juice futures reached a new 3-year high, corn futures reached a new 29-month high, soybean futures reached a new 27-month high, , palm oil futures reached a new 33-month high. NIA believes that Americans will fully feel recent agricultural commodity price increases at their local supermarket within the next six months. NIA predicts that food inflation will become America’s top crisis 0f 2011.

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By: The eFoods Global Business Network