Weekly fuel prices decline

Average retail prices were sharply lower for the week ending Dec. 22 (see table), according to the Energy Information Administration.


Rabobank: Supplies remain tight amid robust consumer demand

The U.S. and Russia will be keys to beef demand, supplies and prices in 2015, Rabobank said in its latest global beef outlook.

Continued tight global supplies of cattle and beef characterized the fourth quarter of 2014, although prices tempered from their third-quarter highs, according to Rabobank’s Food & Agribusiness Research and Advisory group. A big question heading into 2015 is whether beef prices have reached a new normal, or if they will rise further.

Rabobank has one eye watching whether Australian export rates decrease, while herds in Mexico and Canada continue to be run down by the U.S. demand. The other eye is on Russia.

“The U.S. continues to be the driver in the global beef market with constrained supply and strong demand keeping prices high,” said Rabobank analyst Angus Gidley-Baird. “A recent strengthening in the U.S. economy and dollar will support continued imports to the U.S. However, we are watching a drop in the oil price and depreciation of the Russian ruble, given Russia’s status as the world’s largest beef importer.”


Regional outlook

U.S.: Cattle prices during Q4 2014 have continued at record levels, driven by exceptionally tight supplies and strong demand. Q1 2015 cattle supplies will again be tight with renewed price strength expected.

Brazil: Strong international demand for Brazilian beef is likely to be sustained in 2015 due to tight global supplies, demand from Russia and the reopening of the Chinese market for Brazil.

Australia: Australia continues to see record slaughter levels. Total exports for 2014 are also set for a record. With a dry summer forecast, slaughter numbers are expected to remain high, keeping prices low.

EU: The EU beef market is increasingly separating into a premium and ground beef market with divergent price developments. Prime beef will remain elevated in 2015, while ground beef prices will remain under pressure due to lackluster demand and growing supply from dairy-based beef.

China: Retail beef prices are expected to remain stable throughout the rest of 2014 and Q1 2015 as consumption is not strong enough to push prices beyond current historically high levels despite tight domestic supplies and continued growth in imports.

New Zealand: Very strong demand from the U.S. continues to underpin the New Zealand beef industry with record farmgate prices registered in November. The outlook remains very positive for the remainder of 2014 and into Q1 2015.

Canada: 2015 could be a critical year for Canada, as the country needs to determine whether it starts rebuilding or further downsizing its industry.

Argentina: Exports are likely to continue be depressed, as an overvalued exchange rate currently makes Argentine beef more expensive relative to other countries in the region.

Mexico: Low cattle availability continues to cause constraints, although this is partially offset by increased cattle weights due to lower feed costs and better pastures.

Indonesia: Consumption remains strong despite high prices. Following a record year of beef and cattle imports, concerns remain that trade developments between China and Australia and reduced cattle in Australia could tighten supply.


Dairy consumer, producer price forecasts

USDA’s Economic Research Service kept projected consumer dairy product prices steady with last month. The agency said dairy product prices will rise 3.0%-4.0% in 2014, and 2.5%-3.5% in 2015. Both are slightly above the anticipated increase for all foods either consumed at or away from home.

Consumer dairy product prices rose just 0.1% in 2013, after increasing 2.1% in 2012. The 20-year annual average is 2.7%.

The Consumer Price Index (CPI) for food measures the average change over time in the prices paid by urban consumers for a representative market basket of consumer goods and services.

November 2014 retail  dairy product prices declined 0.2% from October 2014, but were up 5.0% compared to November 2013.

ERS also analyzes and models forecasts for the Producer Price Index (PPI), the average change in prices paid to domestic producers for their output. November 2014 farm-level milk prices declined 7.5% from October 2014, but were 8.3% higher than November 2013. November 2014 wholesale dairy prices dropped 3.7% from October 2014, and remained 8.2% above November 2013.

According to full-year PPI projections, 2014 farm-level milk prices are expected to rise 21.0%-22.0%, after increasing 8.1% in 2013. Wholesale dairy prices are projected to increase 10.0% to 11.0% in 2014, after increasing 3.6% in 2013.