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U.S. food inflation rate rises from 2 to
3.3 percent, MU FAPRI economist tells U.N. panel
Missouri
Food prices in the United States crept up 3.3 percent in early 2004 after a stable inflation rate of 2 percent the previous two years, said a University of Missouri agricultural economist.
Higher prices for corn and soybeans played a part, but sharply higher prices for dairy products and rebounding prices for beef have a more direct impact on consumers.
"In spite of big increases in farm-gate prices for grains and oilseeds, consumer food price increases remain modest so far," said Pat Westhoff, international analyst with the MU Food and Agricultural Policy Research Institute. "One reason is that farm prices for commodities account for a declining share of the total cost of producing consumer-ready food in the United States.
"High world prices for grains and oilseeds may be more important to consumers in developing countries."
Westhoff spoke at a meeting of economists preparing a global food forecast at the United Nations in New York.
Consumer demand for milk and dairy prices has remained strong while production has dropped. Long-term low prices for milk caused many dairy farmers to stop production, and milk production per cow has been lower than anticipated.
Westhoff called the sharp increase in milk and dairy prices a "major surprise."
Likewise, demand for beef remains strong, bolstering prices for live cattle at the farm level. The U.S. cowherd has continued to shrink, largely in response to long-term drought in the western United States.
Although it hasn't been quantified, economists speculate consumer interest in high-protein diets, such as the Atkins Diet, help sustain beef consumption and offset the loss of export markets resulting from the December 2003 case of bovine spongiform encephalopathy, or "mad-cow disease," in Washington state.
Also as result of an earlier case of BSE in Canada, import of live cattle from that country has been stopped.
Of concern to consumers internationally is a sharp price rebound for rice. Prices reached record lows in 2001-2002, but have climbed in response to strengthening demand. India has reduced rice exports since 2002; and China reduced sales in 2004.
International corn prices have increased since the late 1990s, after years of low prices. Prices rose in response to a reduced U.S. corn crop in 2002 and have remained high even after a record U.S. corn crop was harvested last fall. "U.S. and global demand for corn has been very strong," Westhoff said.
China has sharply reduced corn exports into the world market.
The China market baffles economists. Even though China continues to export corn, market watchers wonder whether that can continue much longer.
"The USDA estimates China has consumed more corn than it has produced four straight years," Westhoff said. "Yet, China continues to export more corn than it imports.
"If those data are correct, this has only been possible with large stock reductions," Westhoff said.
The USDA reports show that corn stocks in China have been reduced from more than 100 million metric tons at the end of the 1999 crop year to about 20 million metric tons currently.
During the same time, Chinese domestic consumption has continued to increase.
"Something has to change," Westhoff said. "Either we will decide there has been a problem with the data, or China is going to have to produce more, consume less, export less or import more."
Date: 5/6/04
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