Inflationists love pointing to the food prices and saying “Aha, I told you inflation is soaring, buy gold, guns, ammo and head for the mountains”. With beef/prices soaring to their 27- year high and with the food index up 5.1%, do they have a case? Not really.
Food/meat related inflation has to do with simple economic factors, supply/demand, issues within the industry, disease, drought, etc….(see the article below). The truth of the matter is, inflation (CPI) is below 1%. We are in a deflationary environment and the only real inflation you are seeing today is in the asset prices (stocks, bonds, real estate, etc). This will become more evident as the bear market of 2014-2017 starts and the US Economy falls back into a severe recession.
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Food Prices Are Surging. Is Massive Inflation Just Around The Corner? Google
Daily Ticker: Expect to pay more for beef & pork for the foreseeable future
Consumer prices are still rising at a rate below the Fed’s 2% annual target but they’re creeping higher, weighing on households already under pressure from stagnant incomes.
Consumer prices in March rose 0.2%, or 1.5% over the past 12 months, largely because food prices are climbing. Food prices were up 0.4% in March — but three times as much for just meat, poultry fish and eggs. On an annualized basis that selective food index was up 5.1%. Beef prices alone are at a 27-year high.
“The rising cost in beef prices and pork prices [is what] really drives these rising food costs,” says Christopher Waldrop, director of the Food Policy Institute at the Consumer Federation of America.
Like most higher price trends, it’s a matter of supply and demand. The 2012 drought in Texas and California resulted in higher feed prices, which caused many farmers to reduce their herds that produce beef. The U.S. cattle herd is the smallest it’s been since the 1950s, says Waldrop — and that has also reduced the supply of beef. In addition, a pig virus that’s spreading throughout the U.S. has killed millions of pigs and reduced hog supplies. The USDA is now considering mandatory reporting of the virus in order to track the disease.
These reduced supplies are happening at the same time that demand for U.S. beef is rising globally, says Waldrop in the video above. As a result, he says, “Consumers will see higher prices for particularly beef and pork for the foreseeable future.” Consumers will likely respond in one of three ways, says Waldrop:
• Eat less meat
• Choose cheaper cuts of meat
• Switch to chicken and poultry
“If more and more consumers start switching to poultry, you’re going to see increased demand and that will increase prices on poultry as well,” says Waldrop. Retailers “are trying to moderate price increases but that can’t hold on forever. Hopefully this is the peak…but typically prices do rise a little bit before the grilling season.”