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July 28, 2014

Food Inflation to Stay Near Norm in 2014

Overall U.S. food inflation will remain near the historic norm in 2014, even as prices for meat and seafood are pushed higher by disease and widespread drought, the USDA said on Friday. Prices for shelf-stable and processed items are relatively flat. "It appears that supermarkets are maintaining minimal price inflation on packaged food products, possibly in an effort to keep prices competitive in light of rising cost pressures for most perishable items," the USDA said. But drought conditions in California and other states could further drive up prices of fresh produce and beef, the USDA warned. The agency forecast wholesale pork prices to jump 10-11% in 2014, hurt by declining supplies after a virus has killed some 7M piglets in the past year. Wholesale beef prices are forecast to jump 8-9% in 2014, although rising imports are helping to offset some of the decline in domestic supplies. Food inflation, which includes items bought in grocery stores and in restaurants, is seen at 2.5-3.5% this year and then subsiding to 2-3% in 2015. Since 1990, grocery store prices have risen by an average 2.8% per year. The agency noted a recent jump in vegetable prices but said it was too soon to tie the move to the severe drought in California. Fresh fruit prices have risen 5.8% in the year through June compared with a year-ago, though prices fell 4.1% in June, reflecting a decline in citrus prices and a seasonal shift to summer fruits. The latest weekly drought monitor from the National Oceanic and Atmospheric Administration shows much of California in an extreme or exceptional drought, and pockets of Texas are also in exceptional drought. U.S. fish and seafood prices were forecast to rise 3.5-4.5 percent this year, up from last month's forecast of a 2.5-3.5% gain. Article provides a chart of projected price increases by food category.


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