Forget the brisket: U.S. beef prices still spiraling up

WASHINGTON (Reuters) - U.S. retail beef and pork prices, already at record highs, will increase significantly again in 2015 on a combination of disease and a drought in the Southern Plains, the government said on Tuesday.

“Meat prices will likely continue to experience the effects of the Texas/Oklahoma drought and porcine epidemic diarrhea virus (PEDv) in the immediate future,” said the U.S. Department of Agriculture.

Beef and veal retail prices are forecast to rise 11.5 percent in 2014, up slightly from the last month’s forecast of 11 percent, and another 5 percent in 2015, versus a 3.5 percent increase forecast a month ago.

“Improved crop yields have allowed cattle producers to feed cattle longer and to hold cattle for expansion,” USDA said.

The USDA maintained its forecast for a pork price increase of 8 percent but now sees 2015 prices rising by 5 percent, up from 3.5 percent last month. Retail pork prices finally started to subside in October, slipping 0.8 percent.

PEDv, a virus that killed millions of U.S. piglets earlier this year, has reduced the number of hogs ready for production, but there are finally some signs of industry expansion that will drag down hog prices next year.

“Extremely favorable livestock producer margins will lead to greater expansion in the production of poultry, pork and dairy products during 2015, and thus more moderation in prices during 2015 than USDA is currently forecasting,” forecast Bill Lapp, analyst at Advanced Economic Solutions.

Heading into the U.S. Thanksgiving holiday, USDA said overall poultry prices fell 0.9 percent in October. The “other poultry” category, which includes turkey, fell 1.5 percent in October and is down 0.2 percent on the year.

The agency forecast overall U.S. food price inflation for 2014 at a midpoint of 3 percent, just above the 20-year average, subsiding to 2.5 percent next year.

Food inflation in 2014 and 2015 “will continue to exceed overall inflation rates – this has been the case for most of the years since 2007, but is contrary to what occurred prior to 2007,” said Lapp.

The severe California drought has so far not had a major impact on fresh fruit prices, which are forecast to rise to 3.5 percent this year and 3 percent in 2015. Much of the rise in fresh fruit prices reflects recent increases for strawberries and grapes.

Reporting by Ros Krasny; Editing by Bill Trott and Marguerita Choy