USDA: Soaring meat prices likely to stay high

WASHINGTON – Grocery shoppers facing sticker shock at the supermarket for beef, pork and other meats should get ready to pay even more, the federal government said Thursday, with high prices unlikely to ease anytime 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 percent in 2014, up from 5.5 percent forecast a month earlier, and well ahead of the 20-year average increase of 2.9 percent.

The beef and veal category was revised upward to 8.5 percent this year, with pork slated to jump 8 percent. Poultry was unchanged at 3.5 percent.

"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 the USDA's Economic Research Service who compiles the report. "Typically you see a bit of consumer pushback."

Beef and veal prices have soared as a result of the drought in 2012 and the dry conditions currently affecting 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 percent 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 percent 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 shifted their money to pork and chicken that were comparatively cheaper.

While beef sales at Sunshine are down about 20 percent from September 2013, consumers have shown signs of reverting.

"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 virus that has ravaged hog farms in 31 states, killing an estimated 8 million pigs, or about 10 percent of the U.S. herd. The reduction has pushed up prices for bacon, ham and other hog products.

Meat prices are not expected to fall anytime soon, but as livestock herds expand, producers are expected to benefit from a multiyear 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, Iowa. "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 virus outbreak doesn't worsen. That means it could be several months before consumers see a drop in prices for these meats.

Meat prices are expected to jump 3.5 percent in 2015, assuming normal weather conditions.

OVERALL FOOD PRICES

This year, food prices across the United States are forecast to jump 3 percent, nearly in line with the average of 2.6 percent during the past two decades. Overall prices are being kept in check by lower-than-normal increases in breads, cereals and other packaged goods.

• Next year, overall food prices are expected to increase an average of 2.5 percent next year.