Meat and dairy to drive record food prices in 2013

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Global food prices will set records during 2013, according to a new report from Rabobank International, but the social impacts should be milder than in 2008 when shortages of staple foods caused riots in several developing countries. Rabobank issued the report, titled “Re-entering agflation: World food prices to hit record high,” last week.

According to the report, the overall FAO Food Price Index, which serves as a proxy for prices consumers around the world pay for food, will rise 12 percent from August 31 through the end of 2012, then slow to 2 percent growth for the first half of 2013. Prices will peak between the second and third quarters of next year.

Rising prices for agricultural commodities, largely due to severe drought in the United States and elsewhere are behind the expected spike in food prices. However, the analysts say, commodities used primarily for feed, such as corn and soybeans, account for most of the shortages this time around, in contrast with shortages of staple-food commodities such as wheat and rice in 2008.

Rabobank analysts project global stocks of core food staples such as rice and wheat will account for 61 percent of total grain supplies, compared with 53 percent in 2007-2008, resulting in wheat and rice prices about 30 percent lower than their 2008 peaks.

Meat and dairy prices make up 52 percent of the FAO Food Price Index and are the primary drivers of the forecast for higher food prices. The Rabobank report projects prices for slaughter cattle will increase by 6 percent and feeder cattle by 8 percent between now and June 30, 2013. The price of pork, demonstrated by lean hog futures, will rise 31 percent during the same period, according to the report.

Rising meat and dairy prices have global consequences, but the impact will be less than the rise in the price of staple grains in 2007 and 2008. This is because in much of the world, demand for animal proteins is more “elastic” than it is here. If the price gets too high, consumers simply switch to more plant-based foods. Meat demand elasticity tends to be highest in Africa, parts of Asia and South America, and moderate in most of our key customer nations for beef exports such as Japan and South Korea.

So U.S. meat exports are likely to slow from their recent growth rates, but domestic meat consumption will be less affected. The US has the lowest meat-price elasticity in the world, according to Rabobank analysts, meaning demand is less affected by price than elsewhere.

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Carroll Wade    
Jasper, N Y  |  September, 24, 2012 at 08:47 AM

It appears that once again farmers will be blamed for inflation . While the sectors of ag that rely on grain inputs are experiencing difficult times in being profitable , we are not the ones raising the price of food . The grains and the milk have been made commodities and therefore subject to the speculators attention . Do not blame the farmer as he probably is going further in debt to make ends meet , because he is not adaquately compensated for his production . At current prices , there is about 13 cents worth of wheat in a loaf of bread and about the same for corn in a box of corn flakes . That means the farmer could have his prices double and only raise the price of bread and corn flakes abou t that 13 cents . The processors are raising the prices much more and blaming it on the farmer .

Tony Newbill    
September, 24, 2012 at 09:39 AM

What needs to happen is simply Expand the food production worldwide thats the only way inflation in anything can be solved . The problem is whats it going to take to get the investment world to convince the Governments that this can be done and they create economic policies that reward this investment when so many in the academic elitist societies want ZERO GROWTH Policies instead .

That vast Midwest "Fly Over" land  |  September, 24, 2012 at 02:28 PM

Ah, yes, my friends, all true. BUT--who is blaming "Helicopter Ben," aka: "The Bernank," for letting the printing presses roll 24/7 with the latest fraud "QE#3," buying back trash investments from banks with funny-money? All the Fed is doing is shoring up the shaky Wall Street speculators using our money system, and cheating us in the process. End result: our currency (and savings) get depreciated double-quick. Buyers and sellers are figuring this out already and adjusting their prices (costs for us producers) accordingly. This is fraud and theft on a grand scale. Exactly who will pay for this exercise in futility? Hummm...?

Italy  |  September, 25, 2012 at 06:56 AM

It's possible that the meat, milk prices will be lift in the 2013, but only in the market. The prices in the farms will be stay same, so the farmer will be poor another time and the other same dairy or big distribution will be profiteer.

Texas  |  September, 25, 2012 at 09:54 AM

Curious. Do you burn 40% of your food and feed crops in your fuel tanks, using water, fertilizers, diesel fuel, and tankers to haul ethanol to refineries, and call it "sustainable", so Italy can feel green? America does, and we wonder why the cost of feed for meat and milk has gone up 200 to 300% in the last 5 years.

nebraska livestock producer    
nebraska  |  September, 26, 2012 at 10:25 PM

That's what I've been saying for the last five years. When the goverment triples our feed cost what do you think going to happen. I have been waiting for a drought. When American consumer has record high food costs who do you think there going to blame. People need to speak out againist corn based ethanol. It has done nothing but hurt me. Fuel is still high. The local all grain farmers in my area are getting rich. I don't have a safety net like the corn producers have. I don't get any insurance or farm payments. I guarntee in 2013 they'll get a drought disaster payment. If any all corn farmers comment on this then I'll tell you that your not hurting at all. I never seen so many new tractors and combines in all the 25years that I farmed. New houses being built. Brand new pickups every year. Wives that quit there jobs because there making so much money they half to have tax deductions. Brand new grain bins. and so much more I don't have time to tell you. DON'T GET ME WRONG I DON'T WANT $2.00 CORN TO COME BACK. I JUST WANT A LEVEL PLAYING FIELD. THE GOVERMENT NEEDS GET RID OF THE MANDATE AND LET THE FREE MARKET DECIDE IF PEOPLE WANT ETHANOL OR FOOD AT A RESONBILE PRICE. Another thing is all the pasture the being tore up.

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