If it’s what’s for dinner, expect to pay more

WASHINGTON — Grocery shoppers facing sticker shock at the supermarket for beef, pork and other meats should get ready to pay even more in 2014, the federal government said Thursday, with high prices unlikely to ease any time soon.

Estimates for the growth in retail prices for meats, many of which are sitting at record highs because of drought and diseases across the country, were increased by the Agriculture Department in August. The department now expects meat prices to rise 6.5% in 2014, up from 5.5% forecast a month earlier, and well ahead of the 20-year average increase of 2.9%. The beef and veal category was revised upward to 8.5% this year, with pork slated to jump 8%. Poultry was unchanged at 3.5%.

“We weren’t so much surprised that we had to raise (beef prices) as we were that demand has remained high for beef,” said Annemarie Kuhns, an economist with USDA’s Economic Research Service who compiles the report. “Typically, you see a bit of consumer push-back that would ease the demand for the limited supply.” The increase in meat prices, she said, was the result of small herd sizes and continued demand for meat by U.S. consumers.

This year alone, food prices across the United States are forecast to jump 3%, nearly in line with the historical average of 2.6% during the past two decades. USDA said despite the surge in meats, overall food prices are being kept in check by lower-than-normal increases in breads, cereals and other packaged goods.

Beef and veal prices have soared as a result of the lingering impact of a widespread drought in 2012 and dry conditions currently affecting cattle producing states of Texas and Oklahoma. Cattle inventories have decreased in recent months to their lowest level since 1951. As a result, consumers paid an average of $4 a pound for 100% ground beef in August, up 55 cents from the same month in 2013, according to the Labor Department’s Bureau of Labor Statistics.

Sunshine Foods, which operates 14 stores in South Dakota, Iowa and Minnesota, has raised prices on 80% ground beef by $1 during the past year to $3.99 a pound. Darin Hill, who oversees meat purchases for the regional grocer, said consumers initially shunned high beef prices and shifted their money to pork and chicken that were comparatively cheaper. While beef sales at Sunshine are down about 20% from September 2013, consumers have shown signs of coming back to the popular meat.

“People just kind of get adjusted to the pricing,” Hill said. “They always come back to beef.”

Meanwhile, the pork industry has been decimated by the fast-moving porcine epidemic diarrhea (PED) virus that has ravaged hog farms in 31 states, including Iowa, killing an estimated 8 million pigs, or about 10% of the U.S. herd. The reduction has pushed up prices for bacon, ham and other hog products. Center cut pork chops, for example, sold for about $4.35 a pound in August, an increase of 21% during the last year.

Meat prices are not expected to fall anytime soon, but as livestock herds expand, producers are expected to benefit from a multi-year low in grain prices. Eventually, consumers will, too.

“From a consumer standpoint, cheap grain makes cheaper livestock,” said Don Roose, president of U.S. Commodities in West Des Moines. “That’s the catalyst, that’s the game-changer.”

The cattle market is not expected to experience a noticeable increase in herd sizes for about two years, while hogs could take nine months to improve if the industry does not see the PED worsen during the winter. That means it could be several months before consumers see a drop in prices for these meats. Poultry can get to market much faster, in just a few months, allowing chicken supplies to rebound more rapidly.

“It looks like meat supplies are on the rise, it’s just a matter of how quickly,” Roose said.

Meat prices are expected to jump 3.5% in 2015, assuming normal weather conditions. Overall, food prices are expected to increase an average of 2.5% next year. Severe weather events could push food costs higher than the current forecasts, the government said.

original article – http://www.usatoday.com/story/money/personalfinance/2014/09/25/meat-prices-rising/16225919/