If you were tending the grill this past Memorial Day, beware: Those steaks are bound to cost you more come Labor Day.
Late last month, the US Department of Agriculture revamped its forecast for beef and veal prices, now forecasting they will rise by 5.5% to 6.5% in 2014, a sharp jump from last month’s forecast for a rise of 3% to 4%.1
Pork prices are now set to rise this year by 3% to 4%, up from 2% to 3% expected just a month ago.
The new estimates are merely continuing the trend: The consumer price index (CPI) for US beef and veal is up almost 10% so far this year, reflecting the fastest increase in retail beef prices since the end of 2003. Even after adjusting for inflation, prices are at record highs.
Unfortunately for consumers, the anticipated price hikes aren’t limited to meat. The USDA said conditions in California could have “large and lasting effects on US fruit, vegetable, dairy and egg prices,” as the country’s most populous state struggles through what officials are calling a catastrophic drought.
The USDA is projecting that overall US food price inflation for 2014, including food bought at grocery stores and food bought at restaurants, will rise by 2.5% to 3.5% in 2014.
That’s up from 2013, when retail food prices were almost flat, but in line with historical norms – and unchanged from April.
Additionally, the USDA noted that the food-at-home CPI has already increased more in the first four months of 2013. (At-home spending accounts for about 60% of the food CPI).
The less bleak news, for investors at least, is that this increase in food prices has appeared to contribute to the rise in the stocks of certain companies that have a hand in food production. The Rising Food Prices motif, for example, has gained 5.6% in 2014. In that same time frame, the S&P 500 is up 5.9%.
Over the past month, the motif has gained 2.6%; the S&P 500 has risen 2.3%.
It’s worth pointing out, however, that prices of some foodstuffs have remained in check. The USDA said global prices for sugar and coffee remain low, the USDA said, projecting that prices of sugar and sweets will rise by just 1% to 2% in 2014, a lower forecast than a month ago.
The agency also noted that the severe drought in California hasn’t yet had a noticeable impact on national fruit or vegetable prices, though it warned the effects are still to come.
1Ros Krasny, “USDA warns of sticker shock on US beef as grilling season starts,” reuters.com, May 23, 2014, http://www.reuters.com/article/2014/05/23/us-usa-agriculture-inflation-idUSBREA4M0FI20140523, (accessed June 3, 2014).