Taste for Beef Nudges Food Prices Higher - NYT 3/28/04

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New York Times

 

 

Taste for Beef Nudges Food Prices Higher

 

March 28, 2004

By REUTERS

 

 

 

Filed at 9:54 a.m. ET

 

WASHINGTON (Reuters) - The hearty American appetite for

beef, unshaken by the first U.S. case of mad cow disease,

may fuel the largest annual increase in food prices in a

decade, U.S. economists say.

 

 

Prices could climb by more than 3 percent this year, a much

larger gain than usual but still modest enough to avoid

becoming an election-year issue, they said. It has been

three decades since food inflation excited political

concern.

 

 

U.S. cattle prices defied expectations by recovering

quickly from the discovery of one case of mad cow disease

at the end of 2003. Market prices are above government

forecasts, prompting a second look at estimates of an

overall increase in food prices this year of 2.2 percent to

3.2 percent.

 

 

``Right now, I'd say we are at the top end of that,'' said

Ephraim Leibtag, the U.S. Agriculture Department's food

price expert. ``Meat prices aren't falling as we

expected.''

 

 

Meat accounts for 10 percent of Americans' food spending.

 

 

 

Public opinion surveys showed consumers did not stop eating

beef after the mad cow case was reported. Some analysts

credit the popularity of protein-rich, low-carbohydrate

diets for bolstering demand for beef, pork, poultry and

eggs.

 

 

Slaughter cattle sold for $82 to $83 per 100 pounds last

week in the U.S. Plains states, about $2 above USDA's

forecast of average prices for the January through March

quarter.

 

 

Foodmakers also face rising prices for wheat, corn and

soybeans, ingredients used in both livestock and human

food. Soybean futures prices recently soared to a 15-year

high.

 

 

Higher-priced ingredients could pinch food manufacturers.

 

 

 

THIS YEAR'S HARVEST CRITICAL

 

 

``Some of that is going to translate into higher prices at

the checkout counter,'' said analyst Mark McMinimy of

Schwab Washington Research, a consulting firm. ``The

critical thing is going to be the outcome of this year's

harvest.''

 

 

The U.S. soybean stockpile is expected to shrink to a

bare-bones level by harvest. Drought pared winter wheat

sowings but normal yields would mean bumper corn and

soybean crops.

 

 

General Mills Inc. (GIS.N), a major foodmaker, said last

month that ``commodity costs are coming in higher than

planned'' during the current fiscal year and could affect

its earnings.

 

 

Noting strong cattle and dairy prices, Scott Brown of the

Food and Agricultural Policy Research Institute said,

``We're getting closer to the kinds of increases that were

seen in 2001,'' when prices rose 3.1 percent. That was the

largest since 3.3 percent in 1996 and a 5.8 percent spike

in 1990.

 

 

It is too early to tell if cattle prices would remain

strong, said Brown at FAPRI, a University of Missouri think

tank. ``I could tell you both sides of the story for

2004.''

 

 

As examples, he noted Japan and South Korea have not

decided whether to buy U.S. beef again and the United

States must decide whether to allow imports of Canadian

cattle.

 

 

U.S. poultry exports also were in question because of bird

flu cases that have emerged in five states in recent weeks.

 

 

 

Food price inflation usually mirrors the overall U.S.

inflation rate, which is forecast to be low this year.

 

 

Americans are forecast on average to consume 66.8 pounds of

beef, 51.6 pounds of pork and 102.2 pounds of poultry this

year -- a total of 222.3 pounds or 0.61 pounds (0.28 kg) a

day.

 

 

Consumers spend roughly 10 percent of their disposable

income on food. Farmers get just 19 cents out of each $1

spent on food, with the remainder going to food processors,

shippers, packaging and advertising costs.

 

 

http://www.nytimes.com/reuters/business/business-food-consumers.html?ex=1081502

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