A price breather - for now
January 23, 2009
by MEAT&POULTRY Staff
Compared to the first three quarters of 2008, food prices are down. But they’re not going to stay down.
That’s the assessment of Jim Sartwelle, livestock economist with the American Farm Bureau Federation. Sartwelle helped analyze consumer data gathered last fall in the AFBF’s annual "Marketbasket" survey.
"There were tremendous run-ups in price in the first nine months of last year," he told MEATPOULTRY.com, "and overall, I think we’re probably going to see a general food price increase of six percent for the year." But prices in the year’s final quarter dropped significantly – "almost all of the meat items in our basket went down" – reflecting, Sartwelle said, "cheaper diesel, cheaper fuel, cheaper distribution costs, plus less processing, which means you’re saving money in the plant and on packaging."
The Marketbasket Survey has been made by the Bureau every quarter since 1995, and the decline in Q4 08 is the first price decline since a year earlier, Q4 07. In addition to reduced fuel costs, the analyst said the price drop reflects cheaper grain since July of last year. "On anything that comes from livestock, the inputs were all at record levels for much of 2008. Then they came down a bit. But now, with the economy, we’re going to see some liquidation of livestock across the board – beef, pork, poultry." Consumers will benefit from cheaper prices in the short term but can expect to see higher meat prices, especially for beef, according to Sartwelle, in late 2009 and 2010.
Last year, a spike in corn prices, which then upwardly impacted livestock production and meat prices, was blamed by many organizations, including the American Meat Institute, on corn-based ethanol production, which benefited from generous government subsidies. But Sartwelle doesn’t buy that argument. "The increase in ethanol prices was due to a petroleum effect. As oil prices shot up, so did ethanol. It wasn’t a pure ethanol effect." Still, he told MEATPOULTRY.com, "we’re going to have a pretty good breather from high ethanol prices now."