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By Breanne Brammer
WASHINGTON, May 23, 2014-- This year, Memorial Day celebrations could come with a high price tag. Extreme weather and disease outbreak have caused price increases in barbecue goods beef and pork.
Richard Volpe, an economist with the USDA Economic Research Service, said meat prices are high throughout the industry.
“In two of the last three months we have seen almost record monthly increases in national beef prices,” Volpe said.
The U.S. has the lowest cattle numbers since 1951 and inventory continues to decline. Volpe said it takes 18 months for a calf to become market ready, making it difficult to quickly increase supply.
According to the USDA's Consumer Price Index, meat prices increased 5.2 percent in the year ending in March, led by a 7.4 percent spike in beef and veal, the biggest jump in any category.
John Anderson, deputy chief economist for the American Farm Bureau Federation, said they saw the increases in meat prices coming.
“I want to make sure people do not think this run in prices is a surprise,” Anderson said. “Over time we have expected the decline in beef production. I do not think the price change is unanticipated.”
Steve Meyer, president of Paragon Economics Inc., said the Porcine Epidemic Diarrhea virus is a major contributor to reduced pork production, and higher prices. The industry has lost between 7 and 8 million animals, mostly piglets, since June with a majority of losses occurring over the winter.
He anticipates low hog numbers for the summer. And the USDA is predicting a 2.3 percent decline in pork production for 2014, from the previous year.
“Once you lose a pig it can take six months before the market is impacted,” Meyer said. “Now, we will feel the burden in June.”
Meyer said price increases are being felt across the board within the pork industry, especially with bacon because of robust demand, Meyer said.
“The supply reductions have caused prices to go up dramatically,” Meyer said. “Financially this should not be a big hit to the industry, but the burden falls on the customers.”
A three-year drought in the West and Southwest has also affected the pork industry, and caused cattle ranchers to cull their herds, said the AFBF's Anderson, who said consumers may choose to substitute chicken, where price increases haven't been as steep, for steaks and ribs.
Anderson said an improving economy is also increasing demand for meat, adding to the pressure on prices.
“Before Memorial Day people are looking for something to grill,” Anderson said. “It tends to be a prime time for meat demand, which is summer in general.”
Volpe said the USDA is forecasting a 2.5 percent to 3.5 percent increase in retail food costs for the year, which is about average. “It just doesn't feel that way if you are a consumer who purchases more fresh food like meat, dairy, eggs and fruit,” he said.
He said inflation is strong for perishable foods like meat, eggs, fruit and dairy but not vegetables. Vegetables have trended downward in price for three months.
Volpe said citrus prices are on average 21 percent higher than a year ago. He attributes this to an early season cold snap and the citrus greening disease in Florida, which is experiencing the lowest orange production since 1990.
Barry Bedwell, president of the California Grape and Tree Fruit League, said he has not seen a major decrease in California fruit supply this year. But, without rainfall this winter the market could face a negative impact. The state is facing one of the worst droughts in its history.
While allocations from federal and state water systems may be zero this year, Bedwell said only small percentage of vineyards and orchards do not have access to groundwater in 2014 because the majority have wells.
“We have heard estimates that between 400,00 to 800,000 acres will be fallow this year,” Bedwell said. “Most of that is annual crops such as melons, cotton and processing tomatoes. The biggest impact on a perennial fresh fruit commodity could be in citrus.”
The citrus industry is where concern lies due to government restrictions on reduced or non-existent water supplies from reservations. Bedwell said that up to 50,000 acres of citrus along the east side of the San Joaquin valley could be left without water this year.
Bedwell said the U.S. fruit market should be able to meet domestic demand this year but in 2015 increased imports may be a possibility. He said potential regulation dealing with groundwater management and weather are the major market concerns in meeting future demand.
“We should be okay in 2014,” Bedwell said. “But we are very concerned looking toward the future.”
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