Analysts with Great American Group Inc. have reported that pricing for meats and dairy products remains higher than average. The trend reflects the continued market response to the summer 2012 drought, in which pricing for corn used in animal feed was at a historic high.
"Increases in meat and dairy products were due to the lingering effects of the drought," said Ken Bloore, chief operating officer of Great American Group's Advisory and Valuation Services division. "As a result of higher costs for animal feed, many farmers were forced to sell off their stocks at the height of the drought, thereby lowering the current supply of meat in the marketplace."
Great American Group's latest Food Monitor shows that margins have been increasing for meat and processed foods as many companies have been able to fully pass along price increases to customers. While seafood prices have recently been down, due primarily to excess supply in the market, companies were able to preserve margins by selling off lower-priced inventory at a markup to customers, according to a press release.
The drought conditions that plagued U.S. crops last year appear to have abated, and farmers are now reporting favorable growing conditions. The U.S. Department of Agriculture (USDA) expects a record corn harvest of 13.95 billion bushels this year, an increase of 29 percent from 2012. Lower prices for animal feed would enable farmers to restore their herds to normal levels.
"A return to normal feed prices would result in ample supplies of animal-based products such as meat and dairy," Bloore said. "As a result, food prices could be expected to experience only minimal inflation next year."
Read more about food cost management and the supply chain.