With sky-high feed prices pushing up the cost of livestock production, it’s been a challenging few years to be in the meat business. Consumers have had to get used to paying more for animal proteins, and as a result, sometimes they’ve been trading down to more affordable cuts or just buying less meat.
But the tide is turning for supermarket meat departments and livestock producers.
The U.S. Department of Agriculture World Agriculture Supply and Demand Estimates released last week predicts a healthy crop of corn and soybeans, which the industry anticipates will drive down feed prices dramatically.
Agricultural economist Corinne Alexander told me that it’s expected corn prices will move from a record high of $6.95 a bushel to under $5 in the next year.
“What we’re talking about is the largest year-over-year decline in corn prices that we’ve ever seen,” said Alexander, who is an associate professor at Purdue University, West Lafayette, Ind.
As a result of this more affordable feed, it will be a whole a lot cheaper to raise livestock.
“For the entire livestock sector, they are going to move from a period of severe financial strain — and multiple years of very high feed costs and severe financial strain — into a period of profitability,” she said.
She noted that poultry prices will probably start decreasing this winter and pork prices will trend down by next spring. Also, due to several other factors — such as the need for pasture recovery and the length of time it takes to bring cattle to market — beef prices are probably going to stay high for at least the next few years.
Last week, the U.S. Department of Labor’s Consumer Price Index Summary also had good news for retailers.
Industry Voices Blog: Beef Industry Addresses Pricing, Supply to Meet Consumer Demand
Food prices have only gone up an average of 1.4%, with food at home (supermarket) prices up 1% and food away from home (restaurant) prices up 2.1% compared to last year.
After several years of tight margins forcing retailers to pass along price increases to the consumer, Alexander pointed out that this relatively low inflation of 1% for supermarkets will give retailers a little more flexibility on pricing and promotions.
While there will still be some high prices in certain food categories, overall government projections suggest better times, and margins, for supermarkets.
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