Retail meat prices in December posted the biggest increase in seven years, with pork jumping the most in 14 years, contributing to accelerating food inflation that’s expected to take a larger chunk out of consumers’ pocketbooks this year.
A meat price index tracked by the Bureau of Labor Statistics rose 7.2 percent last month compared to December 2009, the largest year-over-year gain for that month since 2003, according to a report released today. Pork prices last month were up 11.2 percent from year-earlier levels, the largest increase for December since 1996, while beef rose 6.1 percent.
Rising meat prices reflect smaller cattle and hog herds, which forced meat processors to bid more aggressively for slaughter-ready animals. Livestock feeders cut herds starting in 2008 after the recession and a spike in corn prices above $7 a bushel led to deep losses. In mid-2010, the nation’s cattle herd shrank to a record low.
Prices for some cuts, such as bacon, reached record highs last year, and many analysts expect beef and pork to become even more expensive this year as high grain prices discourage adding animals to herds.
“It is still primarily a supply-side issue on the meats,” said Daniel Madison, a researcher at the Food and Agricultural Policy Research Institute at the University of Missouri.
“We expect more of the same through 2012, as the economy hopefully improves and the demand side of the picture becomes more of a factor as well,” Madison said. Assuming tight supplies continue and demand strengthens, “prices could continue to move up, and strongly,” Madison said.
Pricier beef and pork is a concern for the industry’s producers because chicken production is expanding and unemployment remains high, which may compel budget-tightening consumers toward cheaper meats, analysts say. Poultry industry executives have said recently they see opportunities to exploit the price differences and grab a bigger share at the supermarket meat case.
Additionally, soaring corn prices, up 67 percent over the past year, are squeezing beef and pork producer margins, making any significant herd expansion unlikely, analysts say. Corn futures in Chicago yesterday touched $6.49 ½ a bushel, the highest price since July 2008.
“It will be difficult to grow the meat production side too much in the coming year with the kinds of feed prices we are expecting, and the beef supply will likely remain tight well into 2012, if not longer,” Madison said.
Retail pork prices are expected to rise 3 percent to 4 percent in 2011 and beef is expected to rise 2.5 percent to 3.5 percent, according to a USDA forecast released in November.
“Higher feed costs due to sharply higher corn and soybean prices have pushed meat prices up over the past six months,” Ephraim Leibtag, senior economist with the USDA’s Economic Research Service, said in an e-mail today. “This is projected to continue during the first half of 2011.”
Consumers did get some relief at the grocery store meat case in late 2010 as prices for many pork and beef cuts fell from highs earlier in the year, reflecting the a slide in cattle and hog markets.
Compared with November, December beef and pork prices at retail fell 0.6 percent and 2.1 percent, respectively, according to the Bureau of Labor Statistics’ Consumer Price Index report. Still, that wasn’t enough to offset rising prices for most of 2010.
For all of 2010, average U.S. retail beef prices rose 2.9 percent from 2009, while pork rose 4.7 percent, according to today’s report.
Among specific cuts, bacon averaged $4.16 at retail during December, down from $4.70 in November but up almost 17 percent from $3.57 a year ago. Bacon hit a record $4.77 in October. Choice-grade, boneless sirloin steak averaged $6.07 a pound last month, down from $6.14 in November and up from $5.68 during December 2009.