Grocery meat, dairy inflation slowed in October but remains high

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The upswing in retail beef, pork and milk prices slowed last month, though supermarket meat and dairy inflation this year remained on track to post among the biggest increases from the past two decades, according to a government report.

Nationwide retail beef and veal prices last month rose 9.6 percent on average compared with October 2010, according to updated data released Nov. 16 by the U.S. Bureau of Labor Statistics. Before October, beef prices posted year-over-year gains of at least 10 percent during six of the first nine months this year.

Retail pork prices during October rose 5.9 percent from a year earlier after increasing by an average of 9 percent over the first nine months of 2011. Average retail prices for dairy and related products rose 9 percent in October after jumping 10.2 percent in September.

The deceleration in part reflects hog and raw milk prices that have dropped from summertime highs. But the respite may be short-lived because of strong U.S. beef and pork exports and historically low inventories of slaughter-ready animals that are expected to persist into 2012, according to some analysts.

Cattle prices reached all-time highs earlier this month, while wholesale beef is up 23 percent from a year ago as meatpackers curbed slaughter. Industry analysts Steve Meyer and Len Steiner said some beef customers are “short bought” on steaks and other cuts and need to stock up before the year-end holidays, suggesting prices will rise more.

“End users have faced significantly higher beef prices for much of the year and either due to fear, or by design, some end users are caught with short positions coming into the holidays,” Meyer and Steiner said in CME Group’s Daily Livestock Report Nov. 16.

“The decision to stay short bought makes sense given the ongoing uncertainty in global markets and constant chatter about another financial crisis brewing in Europe,” the analysts wrote. “The problem with being short bought, however, is that when packers suddenly cut slaughter, it dramatically reduces the supply of product in the spot market… In that situation, end-users have no choice but to pay up to fill their needs.”

Average retail beef and veal prices in 2011 are expected to rise 8 percent to 9 percent from 2010 and increase another 4.5 percent to 5.5 percent in 2012, the USDA said in a forecast last month. The projection for 2011 would be among the five largest annual increases since 1990.

Among specific cuts last month, choice-grade, boneless sirloin steak averaged $6.32 a pound nationwide, up 4 cents from September and up 32 cents from October 2010. Lean and extra-lean ground beef averaged $3.82 a pound, little-changed from September but up 19 cents from a year earlier.

Prices for milk and some pork cuts declined from previous months but remained above last year’s levels.

Boneless pork chops averaged $4.08 a pound during October, down from $4.21 in September but up from $3.89 a year earlier, according to Bureau of Labor Statistics data. Bacon averaged $4.59 a pound, down from $4.82 in September and down from $4.77 in October 2010.

Compared to September levels, retail beef prices rose 0.5 percent, pork rose 0.4 percent and dairy rose 0.1 percent.

Broader readings from the Labor Department's Consumer Price Index showed costs for food eaten at home rose 0.1 percent last month compared with September and rose 6.2 percent compared with October 2010. The food at home index rose 0.3 percent in 2010.


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