Analysts with the Great American Group, Inc. blame the market’s response to the 2012 drought for keeping meat and dairy prices higher than average.
“Increases in meat and dairy products were due to the lingering effects of the drought,” Ken Bloore, chief operating officer of Great American Group’s Advisory and Valuation Services division, said in a news release. “As a result of higher costs for animal feed, many farmers were forced to sell off their stocks at the height of the drought, thereby lowering the current supply of meat in the marketplace.”
Published in the group’s latest “Food Monitor” report, both pork and beef producers reduced their herds in the aftermath of the 2012 drought after grain used in animal feed rose to historic highs. The U.S. cattle herd is currently at its smallest since 1952,
Both pork and beef prices increased in June. The report also showed demand for pork continuing to increase as consumers look to it as a substitute for beef.
However, a return to normal feed prices could help slow the rate of inflation into 2014.
“A return to normal feed prices would result in ample supplies of animal-based products such as meat and dairy,” explained Bloore. “As a result, food prices could be expected to experience only minimal inflation next year.”
USDA economist Ricky Volpe believes that food inflation was affected minimally by last year’s drought, and had there not been a drought, prices would have risen by 0.5 percent less than currently estimated.
“He acknowledges the temptation to think food prices would fall if there had been no drought in 2012, but Volpe points out that food price deflation is virtually unheard of due to other inherent costs in the price of food, such as transportation, processing, and marketing,” Channel 13 News out of Des Moines, Iowa, showed in a report here.