Dairy, meat prices will spur food inflation
Wednesday, 16 December 2009
CHICAGO, Dec 15 (Bloomberg): Rising milk, beef, pork and chicken prices will double the pace of US food inflation next year as livestock supplies shrink and rebounding economies boost demand, said Michael Swanson, a senior economist at Wells Fargo & Co.
Food prices may jump as much as 6 per cent in 2010, Swanson said. The US Department of Agriculture on November 25 forecast 3 per cent to 4 per cent food inflation next year, up from an estimated 1.5 per cent to 2.5 per cent in 2009.
Producers of cattle, hogs, dairy cows and poultry cut output after a jump in feed costs last year, reducing supplies as demand for meat is rising at home and abroad, Swanson said. Corn, the main source of animal feed, will rally next year because of record demand for grain to make ethanol, he said.
"Protein inflation is going to be much higher than people are anticipating," Swanson said Dec. 9 in an interview from Minneapolis. "Corn is a proxy for feed costs, and right now the value of all meat and dairy output is below the price of feed on a long-term relative basis."
Goldman Sachs Group Inc. said in a December 3 report that cattle futures will increase over the next year by the most since 1978, and hogs will gain the most in six years. Cattle futures on the Chicago Mercantile Exchange will reach $1.10 a pound by December 2010, Goldman said. That would be up 32 per cent from 83.275 cents on December 11. Hog futures will reach 80 cents a pound, the bank said, which would mean a 22 per cent rally from last week's close at 65.425 cents.
Food prices may jump as much as 6 per cent in 2010, Swanson said. The US Department of Agriculture on November 25 forecast 3 per cent to 4 per cent food inflation next year, up from an estimated 1.5 per cent to 2.5 per cent in 2009.
Producers of cattle, hogs, dairy cows and poultry cut output after a jump in feed costs last year, reducing supplies as demand for meat is rising at home and abroad, Swanson said. Corn, the main source of animal feed, will rally next year because of record demand for grain to make ethanol, he said.
"Protein inflation is going to be much higher than people are anticipating," Swanson said Dec. 9 in an interview from Minneapolis. "Corn is a proxy for feed costs, and right now the value of all meat and dairy output is below the price of feed on a long-term relative basis."
Goldman Sachs Group Inc. said in a December 3 report that cattle futures will increase over the next year by the most since 1978, and hogs will gain the most in six years. Cattle futures on the Chicago Mercantile Exchange will reach $1.10 a pound by December 2010, Goldman said. That would be up 32 per cent from 83.275 cents on December 11. Hog futures will reach 80 cents a pound, the bank said, which would mean a 22 per cent rally from last week's close at 65.425 cents.