U.S. supermarket meat prices in 2011 are expected to post the largest increase in seven years, according to a government forecast, a reflection of shrinking livestock herds and rising demand that’s pushed cattle and hog markets to all-time highs.
Nationwide, retail meat prices are projected to rise 6 percent to 7 percent this year on average compared to 2010, the U.S. Department of Agriculture said April 25 in an update to its food inflation forecasts.
The projected increase, which marked the third consecutive month the USDA hiked its 2011 meat price forecast, would be the biggest annual gain since prices jumped 8.4 percent in 2004.
Beef and pork are become increasingly expensive as improving global economies lead to greater meat demand. That’s forced meatpackers to bid more aggressively for smaller supplies of slaughter-ready animals, a function of the 2008-09 recession that prompted widespread herd contraction.
“Cattle and hog prices are very high,” Richard Volpe, an economist with the USDA’s Economic Research Service, said in an April 26 e-mail. “Cattle inventories, in particular, are at lows we haven’t seen since the 1950s.”
Additionally, a weak dollar is fueling exports, making U.S. products cheaper for some foreign buyers, Volpe said. As a result, “global demand, especially for protein, is up,” Volpe said.
“Fuel prices are up, which increases production as well as shipping costs,” Volpe added. “The effect is especially strong for meats, because fuel price increases increase the price of feed on top of everything else.”
Pricier meat is contributing to accelerating food inflation at the same time oil’s rally above $100 a barrel has sent gasoline prices to the highest levels since 2008. That’s concerning for beef and pork producers because U.S. unemployment remains high, meaning belt-tightening consumers may forgo higher-priced steaks and chops in favor of cheaper chicken.
Based on a broader index that includes meat as well as dairy products, vegetables and other categories, prices for food consumed at home are forecast to rise 3.5 percent to 4.5 percent this year, the USDA said April 25. That’s up from a 0.3-percent increase in 2010 and would be the largest full-year gain since prices rose 6.4 percent in 2008.
“Prices will rise, relative to 2010, for all major food categories,” Volpe said. “While meat and dairy is projected to see the sharpest increases, fruits and vegetables are going up significantly as well.”
Among specific cuts, boneless pork chops averaged $4.09 a pound at retail in March, up almost 15 percent from the same month a year earlier, according to Bureau of Labor Statistics data. Bacon averaged $4.54 a pound, up 24 percent from a year ago.
Choice-grade, boneless sirloin steak averaged $6.46 a pound last month up 15 percent from March 2010 and the highest for any month since May 2005. Lean ground beef averaged $3.76 a pound, up 9 percent from a year earlier and the highest price for any month, not adjusting for inflation, in records going back to 1991.