Higher dairy prices blamed on 2012 drought

Analysts with the Great American Group, Inc. blame the market’s response to the 2012 drought for keeping meat and dairy prices higher than average.
“Increases in meat and dairy products were due to the lingering effects of the drought,” Ken Bloore, chief operating officer of Great American Group’s Advisory and Valuation Services division, said in a news release. “As a result of higher costs for animal feed, many farmers were forced to sell off their stocks at the height of the drought, thereby lowering the current supply of meat in the marketplace.”
Published in the group’s latest “Food Monitor” report, dairy product prices have increased only slightly in recent months. After milk prices reached a high of $3.58 per gallon in January due to increased demand from Asia, these price have since fallen as demand returned to normal.
The USDA also expects increased production levels this year to offset any linger effects of the drought heading into the year-end. A result, the group sees dairy inflation rates to average between 1 and 2 percent next year.
Pork and beef prices were also affected by the drought. Both pork and beef prices increased in June, with nearly all cuts priced well-above 2012 levels.
However, a return to normal feed prices could help slow the rate of inflation into 2014.
“A return to normal feed prices would result in ample supplies of animal-based products such as meat and dairy,” explained Bloore. “As a result, food prices could be expected to experience only minimal inflation next year.”
USDA economist Ricky Volpe believes that food inflation was affected minimally by last year’s drought, and had there not been a drought, prices would have risen by 0.5 percent less than currently estimated.
“He acknowledges the temptation to think food prices would fall if there had been no drought in 2012, but Volpe points out that food price deflation is virtually unheard of due to other inherent costs in the price of food, such as transportation, processing, and marketing,” Channel 13 News out of Des Moines, Iowa, showed in a report here.
 
Source: Dairy Herd