ERS Predicts Rising Food Prices

The USDA’s Economic Research Service this week predicted supermarket prices likely will continue to rise but at a slower-than-average inflation rate this year, rising 2.0% to 3.0%.

The ERS makes changes in its food price forecasts if conditions change.  This latest report made changes to its outlook for beef, pork, poultry and dairy prices.

The Consumer Price Index for all food increased 0.2% from December into January and is now 3.2% above January 2014.  Increases were noted in restaurant and at-home purchases and likely will continue higher, even though there may be some declines in specific items.

The food-away-from-home CPI increased 0.2% in January and is up 3.1% from a year earlier.  Conversely, the food-at-home CPI was up 0.3% in January and is 3.3% higher than a year earlier.

With droughts in California and Southwestern states, retail food price inflation approached the 20-year historical average of 2.6% last year, while the at-home CPI increased 2.4%.  The most notable annual inflation increases were seen in the perimeter of the grocery store – beef, veal, pork, eggs, seafood and dairy.  Fresh fruit also saw above-average price increases.




Retail beef prices will continue to reflect the effects of drought in Texas and Oklahoma when herd sizes, and calving rates, declined, the ERS said.  The extended production process inherent in bovine physiology means beef prices likely will remain elevated for some time.

Beef and veal prices continued to rise in January, increasing 0.1% from December to a point 19.0% above a year earlier.

While rain has improved Southern Plains pasture conditions somewhat, the area remains engulfed in drought as the latest National Oceanic and Atmospheric Administration drought monitor shows.

As a result, herd rebuilding after years of decline will be touch and go, resulting in uneven and less-than-desired reliability in terms of feeder cattle availability.  This will serve as support to successful cow/calf producers, but it also will mean increased retail beef prices.

Increased crop yields last year mean feedlots can hold cattle a little longer on feed to pack on a few extra pounds.  It also gives cow/calf producers a little more cushion to try rebuilding drought-ravaged herds as the same rains that boosted grain production also aided forage production.




January pork prices fell by 0.1% from December but were up 7.4% from last year.  The latest round of retail pork inflation could be pegged to the Porcine Epidemic Diarrhea virus and its effect on piglet survival. Extensive death loss reduced the number of finished hogs going to slaughter and the amount of pork produced.

But there are signs the industry is coping, and increased production will pressure prices.  The ERS now expects hog prices to fall 26% below 2014 with pork prices rising only 1.5% to 2.5%.




Cash cattle markets Thursday remained quiet with bids from packer buyers at $157 per cwt on a live basis and $250 in Nebraska’s dressed market.  Feedlot asking prices were $162 to $163 live and $255 to $260 dressed.

Cattle traded last week in a range from $157 to $159 per cwt live, down $1 from the previous week, and at $250 to $254 on a dressed basis, down $4 for the week.

Boxed beef prices Thursday were mixed, with the USDA’s choice cutout up $0.62 per cwt at $249.20 and select off $0.65 at $246.58.  The choice/select spread widened to $2.61 from $1.35 on Wednesday.

Volume was moderately heavy with 117 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was up $0.01 per cwt to $206.66, compared with the Mar futures contract, which settled Thursday down $0.65 per cwt at $206.57.