Tuesday, August 27, 2013

Mother Nature's Impact on Dairy, Meat Prices Better Than Previous USDA Forecast

The most severe drought in at least a quarter century is not having as great an impact on the prices of dairy products and meats as government officials initially predicted.
Based on current conditions, the U.S. Department of Agriculture (USDA) anticipates that retail food prices will increase 1.5 to 2.5 percent through the end of the year. Those prices reflect annual inflation that is lower than average, USDA noted earlier this summer.
USDA observed increases in prices for meats and animal-based products in the fourth quarter of 2012. The agency initially thought consumers would bear the major brunt of the price hikes in 2013.
A stronger U.S. dollar, decreased exports of U.S. agricultural products and other factors have offset pressures of the 2012 drought.
Mother Nature last summer refused to rain in many parts of the country. The drought devoured field crops and pummeled cattle production.
Pricing for corn used in animal feeds skyrocketed to record highs, according to Great American Group, Inc., a company specializing in asset management and disposition.
The higher costs for animal feed forced many farmers to sell off their stock at the peak of the drought, Ken Bloore, chief operating officer of Great American Group's Advisory and Valuation Services division, said in a prepared statement last week. This move lowered the meat supply, he observed.
Earlier this year, USDA revealed that the U.S. beef cattle herd sunk to its lowest level since 1962.
But the drought is appearing to have subsided, and farmers are reporting improved growing conditions, according to Great American Group. USDA anticipates a record corn harvest of 13.95 billion bushels this year. That is a 29 percent increase from 2012, Great American Group wrote in an August report.
A potential drop in the price of animal feed could contribute to a more stable herd population, benefiting consumers.
"Lower prices for animal feed would enable farmers to restore their herds to normal levels; this, in turn, would result in ample supplies of meat and dairy products in 2014," Great American Group wrote in the report. "With that in mind, food prices could be expected to experience only minimal inflation in the years to come."
In June, poultry and egg prices were 5.5 percent and 6.9 percent higher than the previous year. According to Great American Group, wholesale beef values dropped to $3.05 per pound in June yet remained 1.4 percent higher than the previous year.
"The impact of high feed prices on retail beef prices was small, in percentage terms, because many beef prices had already attained record highs before the effects of the drought were realized," USDA has explained.

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