Meat - and oil - to lead climb in US food prices

by Agrimoney.com

The US is to follow many crop importing countries in seeing a jump in food prices, as competition for meat – and energy – feeds its way through into consumer's bills.

Food prices may, after "two years of very subdued inflation", rise by 4.2% in 2011, the Food and Agricultural Policy Research Institute (Fapri), a leading agricultural academic body, said.

The growth, from a rate of 0.8% last year, will be lead by costs of meat, as strong demand allows producers to pass through the higher grain costs which are swelling feed bills.

"Since the percentage of corn and many other feed grains consumed directly is small, higher corn prices mostly affect consumers when it comes to buying meat and dairy products," Fapri said in a report to US lawmakers.

Inflation ingredients 

However, the institute also flagged the impact of rising energy bills - swollen as economic revival stokes demand, besides the threat Middle Eastern unrest poses to oil supplies – and of rising wages.

"Commodity costs will take much of the blame for expected higher food prices in 2011 and 2012, but the farm value of food accounts for only about 15-20% of the finished product in the US," Fapri said.

"The largest category of costs associated with final food prices is labour", with energy costs rated "very important" through their role in raising costs throughout the food chain, from farming to processing to distribution.

Many poorer countries have already seen a surge in food prices - which have hit record highs at a global level, according to the United Nations - because of their greater reliance on local, non-processed foodstuffs, exposing their consumers more directly to the jump in agricultural commodity values.

'Profitability outlook bright' 

Among the meat groups, poultry would see the weakest price growth, with consumers expected to pay an extra 5.2% for a broiler this year.

"Just as chicken prices did not suffer as much as other meats due to the economic weakness in 2009, they are not expected to benefit as much from economic recovery as higher-cost beef and pork," Fapri, an offshoot of the University of Missouri, said.

Pork prices are expected to grow most, by 10.7% at the retail level, ahead of beef with 7.3% inflation, although it was cattle farmers that the institute was most optimistic for in profit terms, especially longer term.

"The profitability outlook is bright, beginning in 2012, as economic recovery continues to propel beef demand," Fapri said.

While US beef export, up nearly 1.5bn pounds in five years, are poised to slow, this is only because of the competition for production constrained by a long-term decline in herd numbers.

"In the next few years… domestic consumers will be bidding against those in other countries for limited supplies of US beef."

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