USDA: Higher Beef ‘Here to Stay’ As US Food Costs Rise

Posted by: : Paul EbelingPosted on: March 26, 2014 USDA: Higher Beef 'Here to Stay' As US Food Costs Rise

USDA: Higher Beef ‘Here to Stay’ As US Food Costs Rise

CAG, KRFT

US food prices are expected to rise faster this year after a calmed Y 2013, led by gains in beef, poultry and egg prices, the U.S. Department of Agriculture said on Tuesday.

The food price inflation outlook assumes normal weather, the USDA said, adding that the California drought poses a risk of bigger increases in many food categories, and that high supermarket prices for beef are “here to stay.”

Various measures, including overall food, food-at-home and food-away-from-home prices, are expected to rise by 2.5 to 3.5% in Y 2014. The consumer price index for all food prices rose by 1.4% in Y 2013

The ongoing drought in California could have “large and lasting effects on fruit, vegetable, dairy and egg prices” although that impact has not been seen so far, USDA said.

California is the No. 1 US farm state, producing about 50%  the nation’s fruits and vegetables. The Golden State faces a water crisis after its driest year on record in 2013. Large amounts of farmland are likely to go unplanted this year.

In other categories, USDA said farm egg prices have been exceedingly volatile recently, rising by 20% in February after falling by 28% in January.

Farm cattle and wholesale beef prices rose in February, by 1.1% and 2.4% respectively.

“While not unusually large, these changes indicate that the record-high supermarket beef prices across the country are here to stay for the coming months,” the agency said.

The category that includes many processed, shelf-stable foods is expected to rise by 2 – 3% in Y 2014 after being flat in Y 2013.

Those items, produced by companies such as Kraft Foods Group (NASDAQ: KRFT), and ConAgra Foods Inc. (NASDAQ:CAG), account for 12% of US consumer food spending.

USDA said retailer profit margins, which have contracted since the severe Y 2012 drought, could expand this year, which would contribute to inflation.

Retail prices for cheese, ice cream, and other processed dairy foods also could be on the rise before long, a lagged result of contraction in the US dairy herd, USDA said.

Since Y 1990, US grocery store prices have risen by an average of 2.8% per year, according to USDA. Average supermarket prices fell between February and December 2013, by 0.2%.

Stay tuned…

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Paul Ebeling

 

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.
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