July 25, 2014 / 1:40 PM / 3 years ago

UPDATE 2-U.S. meat, seafood prices rising on drought and disease -USDA

(Adds table with USDA forecasts, details on processed foods)
    By Ros Krasny
    WASHINGTON, July 25 (Reuters) - 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 U.S. Department of Agriculture said on
Friday.
    Prices for shelf-stable and processed items made by companies such as
General Mills and Kraft Foods Group 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 by 10 percent to 11
percent in 2014, hurt by declining supplies after a virus has killed some 7
million piglets in the past year. 
    Wholesale beef prices are forecast to jump by 8 percent to 9 percent 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 percent to 3.5 percent this year and then subsiding
to 2 percent to 3 percent in 2015, the USDA said in its first forecast for the
new year. Since 1990, grocery store prices have risen by an average of 2.8
percent 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, the largest U.S. grower of
fruits and vegetables. 
   "The ongoing drought in California could potentially have large and lasting
effects on fruit, vegetable, dairy and egg prices, and drought conditions in
Texas and Oklahoma could drive beef prices up even further," the USDA said. 
    Fresh fruit prices have risen 5.8 percent in the year through June compared
with a year-ago, though prices fell 4.1 percent 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,
the two most severe categories. Pockets of Texas are also in exceptional
drought.
    U.S. fish and seafood prices were forecast to rise by 3.5 percent to 4.5
percent this year, up from last month's forecast of a 2.5 percent to 3.5 percent
gain. 
    "In general, fish and seafood prices have been climbing due to decreased
supplies of certain species and increased consumer demand, as other meats have
become more expensive," the USDA said.
    
                                            Annual   Forecast     Forecast 
 Consumer Price Indexes           Dec 2013  2013      2014        2015
                                  to June                         
                                  2014                            
                                                                  
 All food                         1.9       1.4      2.5 to 3.5   2.0 to 3.0
                                                                  
    Food away from home           1.3       2.1      2.5 to 3.5   2.0 to 3.0
                                                                  
    Food at home                  2.3       0.9      2.5 to 3.5   2.0 to 3.0
         Meats, poultry, and      6.2       2.1      3.5 to 4.5   3.0 to 4.0
 fish                                                             
              Meats               8.0       1.2      4.0 to 5.0   3.0 to 4.0
                 Beef and Veal    9.2       2.0      5.5 to 6.5   3.0 to 4.0
                 Pork             10.1      0.9      5.5 to 6.5   3.0 to 4.0
                 Other meats      2.9       -0.1     2.0 to 3.0   2.5 to 3.5
              Poultry             1.5       4.7      3.0 to 4.0   2.5 to 3.5
              Fish and seafood    5.2       2.5      3.5 to 4.5   2.5 to 3.5
         Eggs                     -0.4      3.3      5.0 to 6.0   1.0 to 2.0
         Dairy products           2.8       0.1      3.0 to 4.0   2.5 to 3.5
                                                                  
         Fats and oils            1.1       -1.4     1.5 to 2.5   0.5 to 1.5
         Fruits and vegetables    2.4       2.5      2.5 to 3.5   2.5 to 3.5
     Fresh fruits & vegetables    2.4       3.3      3.0 to 4.0   2.5 to 3.5
            Fresh fruits          3.8       2.0      5.0 to 6.0   2.5 to 3.5
            Fresh vegetables      0.8       4.7      2.0 to 3.0   2.0 to 3.0
     Processed fruits & veg       2.4       0.3      2.5 to 3.5   2.5 to 3.5
         Sugar and sweets         0.4       -1.7     1.0 to 2.0   1.5 to 2.5
         Cereals, baked goods     0.6       1.0      1.5 to 2.5   0.5 to 1.5
         Nonalcoholic beverages   -0.6      -1.0     1.5 to 2.5   2.0 to 3.0
         Other foods              1.3       0.5      2.0 to 3.0   1.5 to 2.5
 
 (Reporting by Ros Krasny; Editing by Bill Trott and Leslie Adler)

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