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Thread: Food Prices Surge as Drought Exacts a High Toll on Crops

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    GuncoHolic Black Blade's Avatar
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    Default Food Prices Surge as Drought Exacts a High Toll on Crops

    Food Prices Surge as Drought Exacts a High Toll on Crops



    Surging prices for food staples from coffee to meat to vegetables are driving up the cost of groceries in the U.S., pinching consumers and companies that are still grappling with a sluggish economic recovery.

    Surging prices for food staples from coffee to meat to vegetables are driving up the cost of groceries in the U.S., pinching consumers and companies that are still grappling with a sluggish economic recovery. Leslie Josephs reports on MoneyBeat. Photo: AP.

    Federal forecasters estimate retail food prices will rise as much as 3.5% this year, the biggest annual increase in three years, as drought in parts of the U.S. and other producing regions drives up prices for many agricultural goods. The Bureau of Labor Statistics on Tuesday reported that food prices gained 0.4% in February from the previous month, the biggest increase since September 2011, as prices rose for meat, poultry, fish, dairy and eggs.

    Globally, food inflation has been tame, but economists are watching for any signs of tighter supplies of key commodities such as wheat and rice that could push prices higher.

    In the U.S., much of the rise in the food cost comes from higher meat and dairy prices, due in part to tight cattle supplies after years of drought in states such as Texas and California and rising milk demand from fast-growing Asian countries. But prices also are higher for fruits, vegetables, sugar and beverages, according to government data. In futures markets, coffee prices have soared so far this year more than 70%, hogs are up 42% on disease concerns and cocoa has climbed 12% on rising demand, particularly from emerging markets.

    Drought in Brazil, the world's largest producer of coffee, sugar and oranges, has increased coffee prices, while dry weather in Southeast Asia has boosted prices for cooking oils such as palm oil.

    Terri Weninger, a married mother of three in Waukesha, Wis., said rising food prices have led her to cut back on higher-end meats and sugary snacks for her family.

    "Things are definitely more expensive," the 44-year-old said. "I can't believe how much milk is. Chicken is crazy right now, and beef—I paid $5 a pound for beef!"

    Though rising, U.S. food inflation isn't yet near some lofty recent levels. In 2008, food prices jumped 5.5%, the most in 18 years, and they climbed 3.7% in 2011. Inflation also could be tempered if U.S. farmers, as expected, plant large corn and soybean crops this spring and receive favorable weather during the summer. That would hold down feed prices for livestock and poultry, as well as ingredient costs for breakfast cereals and baked goods.

    The U.S. Department of Agriculture estimated last month that retail food prices will rise between 2.5% and 3.5% this year, up from 1.4% last year. The inflation comes despite sharp decreases over the past year in the prices of grains, including corn, after a big U.S. harvest. In other years—notably 2008—surging grain prices were a key contributor to higher food costs.

    Food prices have gained 2.8%, on average, for the past 10 years, outpacing the increase in prices for all goods, which rose 2.4%, according to the government. Overall consumer prices are expected to rise 1.9% this year, according to economists surveyed by The Wall Street Journal.



    Beef cattle at a drought-hit California ranch in February, at time of year when fields normally would be covered in lush, green grass. Agence France-Presse/Getty Images

    Still, the price increases pose a challenge for food makers, restaurants and retailers, which must decide how much of the costs they can pass along and still retain customers at a time of intense competition and thin profit margins. During previous inflationary periods, food makers switched to less-expensive ingredients or reduced package sizes to maintain their profit margins. Retailers and restaurants usually raise prices as a last resort.

    White Castle Management Co., a closely held operator of some 400 hamburger outlets, said its beef costs jumped 12% in February from a year earlier and that it forecasts prices by August will be nearly 27% above last year's. But White Castle plans to absorb the increases as long as it can, keeping its menu prices the same, a spokesman said.

    Unlike larger chains that have sophisticated hedging strategies to help offset higher commodity costs, "as a relatively smaller regional chain, these strategies are more difficult for us to execute," said the spokesman for the Columbus, Ohio, company. Still, "we will resist raising prices."

    Fatburger North America Inc., which has 150 restaurants globally, likely will increase its burger prices by up to 5% next month to reflect higher beef costs, said Andy Wiederhorn, chief executive of the privately held company. "The prices will stay up for a year and come down in the middle of next year when supply catches up with demand," he said.

    One reason prices are higher now is the lingering effect from the historic 2012 U.S. drought, which sent animal-feed prices surging to record highs and caused livestock and dairy farmers to cull herds, analysts said.

    In California, the biggest U.S. producer of agricultural products, about 95% of the state is suffering from drought conditions, according to data from the U.S. Drought Monitor. This has led to water shortages that are hampering crop and livestock production.

    U.S. fresh-vegetable prices that jumped 4.7% last year are forecast to rise as much as 3% this year, while fruit that gained 2% last year will rise up to 3.5% in 2014, according to the USDA.

    Dry weather in Brazil has contributed to a dramatic increase this year in prices for arabica coffee, the world's most widely produced variety. Arabica-coffee futures, which were at a seven-year low last year, settled at a two-year high of $2.0505 a pound on March 13.

    In each of the past two years, global food prices on average declined from the previous year, as farmers ramped up production of wheat, sugar and other commodities, according to the United Nations Food and Agriculture Organization, which publishes a monthly food-price index. But that index rose 5.2 points to 208.1 last month compared with January, the sharpest jump since mid-2012.

    Food-price increases are a particularly touchy issue for emerging markets, where spending on food accounts for a higher share of monthly budgets than in wealthier countries.

    In 2008, a spike in food prices caused riots from Haiti to sub-Saharan Africa and South Asia. Three years later, in 2011, rising food prices were a factor behind the Arab Spring protests in North Africa and the Middle East that ultimately toppled governments in Tunisia and Egypt.

    The increase in global prices last month surprised some economists, and raised the specter of more severe increases that could hit the world's poorest countries, economists said.

    "To be honest, until a month ago, our feeling and thinking was that most markets were well-supplied," said John Baffes, a senior economist at the World Bank. "Now, the question is: Are those adverse weather conditions going to get worse? If they do, then indeed, we may see more food price increases."

    —Annie Gasparro contributed to this article.

    http://online.wsj.com/news/articles/...778530606.html


    Black Blade: We are better off than most because we have "prepped" with long term nonperishable food storage. I added a few cases of canned corn, red, white, black, pinto and kidney beans. I also added another 40 lbs of white rice and will be adding more. Looks like the global food supply is getting tighter and tighter (and more expensive - especially livestock).
    When you're born you get a ticket to the freak show. When you're born in America , you get a front row seat. - George Carlin


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    NoWorkCamp4Me railbuggy's Avatar
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    And the beat goes on.
    SOON-We already lost the war. You are the resistance.

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    No Hope For Me Coils's Avatar
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    Yeah instead of saying the dollar has lost more of it's value, they're just blaming a drought
    "Government is not the solution to our problem, government is the problem" Ronald Reagan

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    GuncoHolic Black Blade's Avatar
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    Price of Ground Beef Climbs to Another Record High

    cnsnews.com / By Ali Meyer / March 18, 2014 – 2:49 PM

    (CNSNews.com) – The seasonally adjusted price index for uncooked ground beef jumped 3.8 percent from January to February, as the average price for a pound of 100-percent ground chuck rose from approximately $3.59 in January to a new record high of $3.73 in February, according to data released today by the Bureau of Labor Statistics.

    The BLS’s seasonally adjusted price index measures the relative change in the price of product from a baseline of 100. From January to February, the price index for uncooked ground beef rose from 248.864 to 258.323, its highest level ever. The 258.323 price index also indicates that the seasonally adjusted price for ground beef is almost twice what it was in January 2001 when the price index was 130.4.



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    Black Blade: May have to take inventory of my game in the freezer.
    When you're born you get a ticket to the freak show. When you're born in America , you get a front row seat. - George Carlin


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    GuncoHolic Black Blade's Avatar
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    Hold the bacon: Breakfast staples face surging prices



    cnbc.com/ AP / Published: Friday, 21 Mar 2014 | 1:33 PM ET

    Breakfast is now being served with a side of sticker shock.

    The price of bacon is surging and the cost of other morning staples, like coffee and orange juice, is set to rise because of global supply problems, from drought in Brazil to disease on U.S. pig farms.

    And it’s not just the first meal of the day that’s being affected. The cost of meats, fish and eggs led the biggest increase in U.S. food prices in nearly 2 1/2 years last month, according to government data. An index that tracks those foods rose 1.2 percent in February and has climbed 4 percent over the last 12 months.

    While overall inflation remains low, the increases in food prices are forcing shoppers to search out deals and cut back.

    Bacon

    Bringing home the bacon is costing more.

    The price of lean pork in the futures market is at record levels and is up 52 percent since the start of the year, to $1.31 a pound. Traders are concerned about a deadly virus in the U.S. hog population.

    That could further boost bacon prices, which were already rising after farmers cut pig production because of higher feed costs. Those cost climbed after a drought in 2012.

    The average price of a pound of sliced bacon in U.S. cities was $5.46 in February, up from $4.83 a year earlier and $3.62 five years ago, government data shows.

    The retail price of pork is projected to climb by 2.5 percent to 3 percent this year, according to government forecasts.

    “You should expect to see very high prices for your ground beef, your other meat cuts, all the pork cuts will be higher this year,” Donnie Smith, CEO of Tyson Foods, said in an interview with CNBC on March 12.

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    When you're born you get a ticket to the freak show. When you're born in America , you get a front row seat. - George Carlin


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    Gunco Member Plan B's Avatar
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    3.5% is BS it has been more than that year after year. Time to buy half of a grass fed Oregon beef.

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    Gunco Regular Rocster's Avatar
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    Yeah, the Govt not counting food prices as part of their 'inflation measurements' is just nutty!
    What shocked me last year was the huge jump in peanut butter prices. Seemed like 33% up.
    Most recently here on the Left Coast is the creeping up of Chicken prices - as we used to benefit from them being raised here very locally in the central valley. Turkey went up at the end of last year too, I used to find ground turkey chubs for $2 a lb about a year ago, now I can't find them very often and when I do they are $3.50 and up a lb.

    Milk is now toggling up fast - $3.79 a gallon at discount stores, Safeway price $4.50 a gallon! Us guys with growing kids go thru a lot!
    I think this is due to our Calif. drought affected feed/alfalfa costs and many dairys around here are having to pay big bucks to truck it in from further away. Beef prices - Seriously, I haven't bought a steak in over a year.....
    So what is going up in your area?
    "To invent, you need a good imagination and a pile of junk."
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    No Hope For Me Coils's Avatar
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    So what is going up in your area?
    Basically everything, it started going up in large steps about two or three years ago, and certain items are creeping up again and milk is one of them.
    The one store I mainly go to has half sized carts (basically a square basket on the top & bottom), I used to completely fill one for around $100 (+/- a little), a week ago I just fill the top and it was around $70.

    I only buy meats when they are on sale but the sales are far & few now. Cereal too, I wait until it's really cheap and stack it deep , I think I got two dozen boxes right now.
    "Government is not the solution to our problem, government is the problem" Ronald Reagan

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    GuncoHolic Black Blade's Avatar
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    One thing I noticed yesterday was that the supply of "Easter Chicks" was nearly gone from the local ranch store. I never seen that before. I mentioned to the store manager that the "preppers" must have raided his store. He said maybe not far off the mark and he said that people said were buying them to raise for eggs and meat. Maybe people are trying to keep ahead of the rising food prices by raising their own food. All I know is that in previous years the tanks with chicks, duckling and turkeys would be well stocked into a few weeks past Easter.



    Turkeys and Chicks
    When you're born you get a ticket to the freak show. When you're born in America , you get a front row seat. - George Carlin


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    NoWorkCamp4Me railbuggy's Avatar
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    About ten years ago my brother-in-law bought fifty chicks and penned them up on his Dads acreage. Three of my brother-in-laws were in the tree trimming business started by there grandfather and dad after WW2 when the family came to SW Ohio. The hollows on Dons acreage were filled with the tree trunks and trimmings, so Kevin was there almost every day to check his flock. In the end he said he did not save much money after paying the butcher to process his flock. Back in the nineties I use to buy pork from a friend at work. A couple times a year he would take orders for fresh pork at work and charge $1.25 per pound, it was up to $1.50 last time he did it, for any cut you want. I use to order about ten pounds of sausage and twenty pounds of chops off him to feed my family of eight back then.
    SOON-We already lost the war. You are the resistance.

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