Carnivores Beware: Meat Prices Set to Soar
If you spent any time at all in the U.S. this summer, you undoubtedly experienced the effects of the widespread drought. Temperatures were high and the sun was scorching even in the milder areas of the country.
But even though the drought has passed and the weather's begun to cool, the aftereffects of the heat are growing worse.
Corn and soybean crops in the U.S. were badly damaged. The harvest will be much smaller than expected. And most affected will be meat prices.
All across the world, farmers are “liquidating” – slaughtering – their herds of pigs and cattle. Corn and soy are often used in animal feeds, but with the price of these products rising, the farmers can't afford the feed.
And by next summer, a report by Rabobank predicts, food prices will rise 14%.
From the Raw Story:
Nicholas Higgins, a Rabobank commodities analyst and author of the report, said: “There will be an initial glut in meat availability as people slaughter their animals to reduce their feed bills. But by next year herds will be so reduced that there won't be enough animals to meet expected demand and prices will soar.”
The Bank of England was set on reducing inflation to 2% by next year, but the effects of the U.S. drought may hinder that.
It was on track to meet its goal, too. Food prices had been lowering, reducing inflation to 2.5% by this August.
But now pork for July 2013 delivery has already risen roughly 31% in price. And this will only continue.
And pork may not even be the biggest problem. Farmers have yet to start significantly reducing their cattle herds, but once they do this will be even more of a problem than pigs. Higgins said:
“Farmers cut back pigs because they can rebuild them the quickest. Replacement cattle take a lot longer to breed – a year and a half compared to six months for pigs.”
The global index of food is 52% meat and dairy. And Rabobank predicts that the United Nations Food and Agriculture Organisation (FAO) index could rise to 243 next summer, higher than it's ever been.
In short, food prices are set to soar.
Of course, these price rises will most affect the west, where meat consumption is highest. Though the effects will most likely be severe, they will be nothing compared to the food riots in 2007 and 2008, when the price of wheat and rice skyrocketed. People in the east were gravely affected.
This time, those staples will be there to fall back on. But countries are still concerned the effect will grow to be more widespread.
From the Raw Story:
Higgins said the major danger to global stability was the threat of countries stockpiling supplies. “We've already seen the first indications of that, with Indonesia hinting it is going to increase corn stock pile levels, South Korea considering a domestic purchasing regime and very strong wheat purchases in Iran disproportionately higher than in its past history.”
The price rise isn't expected to change the way of life in the west – people probably won't readily drop meat from their diets – but it could lead to a rise in malnutrition.
The head of Glencore recommends playing commodities to profit off these coming price hikes.+4
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