Retail milk prices surged nearly 12 percent in May from a year earlier, the biggest increase in more than three years, and beef and pork prices both climbed over 10 percent, leading a food inflation upswing that’s forcing Americans to pay more at the supermarket check-out line.
U.S. consumers paid record or near-record prices for ground beef and bacon last month, not accounting for inflation, according to the Bureau of Labor Statistics’ monthly Consumer Price Index report June 15. The rise in average milk prices was the largest year-over-year increase for any month since milk rose 13.5 percent in April 2008.
Rising beef and pork prices reflect producers’ herd reductions triggered by the 2008-09 recession and a spike higher in feed costs. As meat processors bid more aggressively for smaller supplies of slaughter animals, partly to keep pace with rising exports, cattle and hog prices hit record highs earlier this spring. Rising milk prices also reflect stronger export demand for U.S. dairy products, fueled by a weak dollar.
But the rapid rise in beef and pork prices comes with gasoline near $4 a gallon and U.S. unemployment above 9 percent, stirring concern that consumers may shift to cheaper chicken and cut back on dairy products as well.
“With all dairy product prices a lot higher and with gas up, we can expect some negative demand response,” said Robert Cropp, an agricultural economist at the University of Wisconsin in Madison. Wholesale cheese prices are also higher, Cropp added, meaning “we can expect restaurants and fast food to cut back on cheese orders.”
Through May, retail beef and pork prices both rose more than 10 percent, on average, compared with the corresponding months in 2010, according to CPI data. For all of 2010, beef and pork rose 2.9 percent and 4.7 percent, respectively. Average milk prices were up 7 percent during the first five months of the year, after rising 3.6 percent in 2010.
Fresh, whole milk at retail averaged $3.65 a gallon nationwide during May, up 5 cents from April and the highest price for any month since $3.68 in December 2008, according to CPI data.
Among specific beef and pork cuts, bacon averaged $4.77 a pound last month, up 11 cents from April and up 24 percent from $3.86 a year earlier. The May price was just shy of the record $4.773 reached in October.
Choice-grade, boneless sirloin steak averaged $6.19 a pound, down from $6.33 in April and up from $6.14 in May 2010. Lean and extra-lean ground beef averaged $3.85 a pound, up 9.4 percent from May 2010 and the highest monthly price, unadjusted for inflation, in records going back to 1991.
By comparison, boneless chicken breasts averaged $3.11 a pound in May, down 5.5 percent from April and down 4 percent from the full-month average a year earlier.
A broader price index for food consumed at home rose 0.5 percent during May from April and was up 4.4 percent from May 2010, with all major grocery categories posting increases, the Bureau of Labor Statistics said.
Still, the May CPI numbers indicated meat prices are moderating from the steep increases earlier this year. Cattle and hog futures have fallen from record highs reached in April, suggesting beef and pork prices will slip as lower animal costs are passed through to the retailer.
On a month-versus-month basis, the CPI index for beef and veal rose 1 percent in May, following a 1.2-percent rise in April. Average pork prices were up 1 percent in May, down slightly from the average for the previous four months.
Wholesale price readings released by the government earlier this week also indicate consumers may see some relief. An index for crude food and feedstuffs fell 4.4 percent in May from April amid lower cattle and hog prices, the Bureau of Labor Statistics said in its monthly Producer Price Index report June 14. In April, the index rose 4 percent. Finished food prices fell 1.4 percent in May, the largest month-over-month decline since June 2010.
Bacon and many other products are still relatively cheap compared with the high-inflation period of the early 1980s. During September 1982, retail bacon averaged $5.53 in 2011 dollars, according to CPI calculations.