UPDATE 2-USDA warns of sticker shock on U.S. beef as grilling season starts

Fri May 23, 2014 12:21pm EDT

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(Adds table with USDA forecasts, other details)
    By Ros Krasny
    WASHINGTON, May 23 (Reuters) - The Department of Agriculture has warned of
sticker shock facing home chefs on the eve of the Memorial Day holiday weekend,
the unofficial start of the U.S. summer grilling season.   
    The agency said conditions in California could have "large and lasting
effects on U.S. fruit, vegetable, dairy and egg prices," as the most populous
U.S. state struggles through what officials are calling a catastrophic drought. 
    The consumer price index (CPI) for U.S. beef and veal is up almost 10
percent so far in 2014, reflecting the fastest increase in retail beef prices
since the end of 2003. Prices, even after adjusting for inflation, are at record
highs. 
    "The drought in Texas and Oklahoma has worsened somewhat in the last month,
providing further complications to the beef production industry," USDA said. 
    Beef and veal prices for the whole of 2014 are now forecast to increase by
5.5 percent to 6.5 percent, a sharp advance from last month's forecast for a 3
to 4 percent rise. Pork prices are set to rise by 3 percent to 4 percent, up
from a 2 to 3 percent advance expected a month ago. 
    The USDA said overall U.S. food price inflation for 2014, including food
bought at grocery stores and food bought at restaurants, would rise by 2.5
percent to 3.5 percent in 2014. 
    That is up from 2013, when retail food prices were almost flat, but in line
with historical norms and unchanged from April's forecast. 
    "The food-at-home CPI has already increased more in the first four months of
2014 then it did in all of 2013," USDA noted. At-home spending accounts for
about 60 percent of the U.S. food CPI. 
    A major factor for rising pork prices is the Porcine Epidemic Diarrhea Virus
(PEDv), responsible for more than 7 million U.S. piglet deaths in the past year.
    
    Egg prices are also climbing - up 15 percent in April alone - and are
expected to rise by 5 to 6 percent on the year, and higher milk prices are
feeding through to other products in the dairy case, particularly cheese. 
    Sweet lovers and caffeine addicts will see some relief, however, since
global prices for sugar and coffee remain low, USDA said. 
    The agency forecast prices of sugar and sweets to rise by 1 percent to 2
percent in 2014 and prices for non-alcoholic beverages to rise by 1.5 percent to
2.5 percent. Both forecasts were lowered this month.    
    "It appears 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," USDA said. 
    So far the severe California drought has not had a discernible impact on
national fruits or vegetable prices, USDA said, while warning that the effects
are still to come.     
       
 Consumer price indexes           Mar to  Annual    Forecast      Prev 2014
   (USDA)                         April    2013        2014      Forecast
 All food                         0.4     1.4      2.5 to 3.5     2.5 to 3.5
                                                                  
 Food away from home              0.3     2.1      2.5 to 3.5     2.5 to 3.5
                                                                  
 Food at home                     0.5     0.9      2.5 to 3.5     2.5 to 3.5
   Meats, poultry, and fish       1.7     2.1      3.0 to 4.0     2.5 to 3.5
   Meats                          2.7     1.2      3.5 to 4.5     2.5 to 3.5
   Beef and Veal                  3.0     2.0      5.5 to 6.5     3.0 to 4.0
   Pork                           3.2     0.9      3.0 to 4.0     2.0 to 3.0
   Other meats                    1.3     -0.1     2.0 to 3.0     2.0 to 3.0
   Poultry                        -1.0    4.7      3.0 to 4.0     3.0 to 4.0
   Fish and seafood               1.3     2.5      2.5 to 3.5     2.5 to 3.5
   Eggs                           0.5     3.3      5.0 to 6.0     3.0 to 4.0
   Dairy products                 0.5     0.1      2.5 to 3.5     2.5 to 3.5
                                                                  
   Fats and oils                  -0.9    -1.4     1.5 to 2.5     1.5 to 2.5
   Fruits and vegetables          0.5     2.5      2.5 to 3.5     2.5 to 3.5
   Fresh fruits & vegetables      1.1     3.3      2.5 to 3.5     2.5 to 3.5
   Fresh fruits                   2.2     2.0      3.5 to 4.5     3.5 to 4.5
   Fresh vegetables               -0.2    4.7      2.0 to 3.0     2.0 to 3.0
   Processed fruits & vegetables  -1.5    0.3      2.5 to 3.5     2.5 to 3.5
   Sugar and sweets               -1.0    -1.7     1.0 to 2.0     2.0 to 3.0
   Cereals and bakery products    0.1     1.0      1.5 to 2.5     1.5 to 2.5
   Nonalcoholic beverages         -0.2    -1.0     1.5 to 2.5     2.5 to 3.5
   Other foods                    0.2     0.5      2.0 to 3.0     2.0 to 3.0
 
 (Reporting by Ros Krasny; Editing by Eric Beech, Doina Chiacu and Bernadette
Baum)
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