NEW YORK (MainStreet) — The drought in California and demand will keep food prices higher in 2015 with household staples such as meat and dairy expected to rise by 4%.
Consumers already felt the pinch in 2014 when the price of beef rose by 10% to 12%, compared to its usual increase of 2% to 3% each year, said Warren Graeff, the agriculture market manager for PNC, the Pittsburgh-based bank. The effects of the drought in the western Great Plains in 2012 and 2013 pushed demand to outstrip supply as ranchers saw their herds of cattle drop to 30- to 40-year lows and are still lingering, he said.
While pork prices did not rise as much as beef, a virus which infected hogs caused supply to shrink and pushed the price of pork up by 8% to 10% in 2014, Graeff said.
“Prices increased quite a bit as the supply of bacon, ham and sausage declined,” he said. “That hit consumers significantly and it led to them having to pay a lot more at the grocery store for animal protein.”
With the large increases in beef and pork prices, many people switched to buying chicken and fish, Graeff said. The price of chicken remained stable and rose by a historical average of 2% to 3% in 2014 and was not as “adversely affected” with a “plentiful supply,” he said. Fish and seafood prices increased by 3.5% to 5%, slightly higher than the normal increase of 2% to 3%.
The good news is that both pork and beef prices will only increase moderately by 4% to 5% in 2015, which is still “somewhat expensive, but the rate of increase is not as drastic,” Graeff said. As the herds of cattle increase, prices will moderate by 2016, he said.