Food inflation less than average in 2014, USDA says

By Philip Brasher

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Jan. 23, 2015 - Food prices rose by 2.4 percent last year, less than the historical average, despite sharp increases in meat costs and the drought in California, the Agriculture Department says.

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Food costs have risen by an average of 2.6 percent annually over the past 20 years. USDA's Economic Research Service estimates that prices will rise at a similar rate this year - 2 percent to 3 percent.

The sharpest price increases last year were in beef, pork, eggs, seafood, dairy and fresh fruit, according to USDA economists, while prices for fresh vegetables, sweets and nonalcoholic beverages fell.

Beef prices shot up 12.1 percent in 2014 due to the lingering effects of a multiyear drought in Texas and Oklahoma that forced producers to reduce herds; pork prices rose 9.1 percent on the impact of the porcine epidemic diarrhea virus. Egg prices were 8.4 percent higher.

USDA expects beef prices to rise an additional 5 percent to 6 percent in 2015, in part because producers are fattening cattle longer to take advantage of record prices for steers and heifers.

But expansion in the hog industry is expected to mean pork prices will rise just 2 percent to 3 percent in 2015. As recently as last month, USDA had been projecting that pork prices would be 4.5 percent to 5.5 percent higher in 2015.

The economists continue to warn that the California drought “could have large and lasting effects on fruit, vegetable, dairy, and egg prices.” However, they said the impact of low oil prices could lead to lower production and transportation costs that may get passed to the retail level.

Another unknown: the impact of California's new standards for housing laying hens on egg prices. “While this may cause higher prices in California, prices elsewhere may face downward pressure if out-of-state egg producers choose not to alter their facilities and look elsewhere within the U.S. to sell their eggs,” ERS said in its forecast.

For now, the economists are estimating that egg prices will rise by 2.5 percent to 3.5 percent this year. “It's too early at this point to know what effect it's going to have,” ERS economist Annemarie Kuhns said, referring to the California law.

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