From The Street.com
What 2016 Food Prices Can Tell Us About the Economy
As the avian influenza outbreak appears to be contained and the remnants of the drought in California have dissipated, food prices will stabilize in 2016, with household staples like dairy, meat and vegetables increasing modestly by about 2%.
After the drought in California and the avian flu, consumers were faced with higher food prices in 2015, which rose by as much as 4% for meat and dairy products. The lack of any weather-related or major agricultural issues recently means prices have been moderated, and the increase will remain lower than the historical average of 2.6%, said Warren Graeff, the agriculture market manager for PNC, the Pittsburgh, Pennsylvania-based bank.
Eggs were besieged in May by an avian flu, the first U.S outbreak and although prices rose dramatically for several months, the lack of additional outbreaks dampened the market value and prices are predicted to remain flat in 2016.
“The egg industry was declared free from the avian flu in mid November and the migratory fowl season has wound down,” he said. “We are hoping there is a not a problem this year.”
The avian flu resulted in as much as 10% of the U.S. population of laying birds being lost, said Jonathan Phillips, CEO of TEN Ag Tech, a San Juan Capistrano, Calif.-based consumer-to-farm traceability company that provides chemical-free trace codes for eggs. As the supply of the number of flocks grows, prices will stabilize.
“Eggs from caged sources will remain the lowest priced eggs, and cage free production will likely remain significantly more expensive than eggs from caged sources, as data supports that production costs are higher,” he said. “Eggs from free range and pasture raised sources where flocks enjoy optimal housing will remain the most expensive eggs through 2016.”
Prices for eggs that derive from caged hens fluctuate based on not only supply and demand, but also the underlying price of grain for feeding the hens, Phillips said. Before the nearly catastrophic outbreak, the cost of a dozen eggs in California during August 2014 was as low as $1.45 per dozen and averaged $2.41 per dozen. After the avian flu struck, eggs were $3.61 for the same cartons, according to the U.S. Department of Agriculture.
“The estimates for the outlook will return to more normal pricing, but the stabilization of supply is likely to occur as we enter the fall of 2016,” Phillips said.
Beef producers still face the lingering effects of the drought in the western Great Plains in 2012 and 2013, but as ranchers have focused on increasing their herds, the boom in supply has helped moderate prices. Prices will increase by only 2% to 3%, Graeff said. Consumers had 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.