Arizona Agriculture: The Promise of Food Prices; They Will Change

By Julie Murphree, Arizona Farm Bureau: The one constant of food prices is that they will always change. This is brought home to us every time Arizona Farm Bureau does its quarterly marketbasket. With the fourth quarter of 2013 released today, we’re reminded of this truism once again.

Though a measurement of the past, our marketbasket gives us an idea of what we are currently feeling with our food purchases and what we might feel in our food shopping basket in the coming weeks. This should work as a budget planning strategy, certainly for growing Arizona families.

To me, it’s fascinating to measure the food price market especially against what we’re doing in Arizona agriculture, right at the “farm gate” level. It makes me appreciate the relationship between the farmer and rancher and our Arizona families.

In this fourth quarter marketbasket, we clearly feel the rise in price in our protein purchases, especially beef and eggs. So how does that correlate with what the farmer and rancher is dealing with at the farm gate?

A few things.

Let’s take eggs first. We’ve seen a precipitous rise in eggs for the last four quarters in Arizona Farm Bureau’s marketbasket (well, down four cents in the second quarter):

2013

  • 1Q                   $1.90
  • 2Q                   $1.86
  • 3Q                   $1.96
  • 4Q                   $2.14

Looking at this trend, we’d default to the conclusion that this might continue. Not so, when we get from the farmer the inside track on what’s taking place with the egg market. “The farm gate value for eggs has dropped by one third since Christmas,” explains Glenn Hickman, CEO for Hickman’s Family Farms, Arizona’s only commercial egg producer. “This speaks to the demand for eggs over the long holiday season that just ended. There really isn’t a good substitute for eggs in holiday recipes, so as long as we are going to celebrate with friends and family around the holidays, we will probably get a boost in egg prices. That’s why you often see higher prices for eggs during the holidays.”

Another point about general demand of key food items like milk and eggs means we need to look at production. Adds Hickman, “Milk cows and egg-laying chickens don’t read a calendar very well, and they have productive lives spanning over a year. So it’s very hard to seasonally adjust production to demand [like telling your herd or flock to slow down production during slower consumer consumption].  For example, in the summer, normal home behavior patterns change. Kids are out of school, vacations are taken, and generally it’s much warmer. As a result, we’re not cooking and baking as much.” 

His key point is that eggs and milk demand is not as strong in July as it is in December.  However, production is relatively stable because of the excellent care of our farm animals.

So, demand swings for food products that don’t have too much of the middle man in the middle – like eggs and milk – can really be influenced by our seasonal consumption habits.

Beef, that also showed an increase this last quarter marketbasket, has an additional consideration. To enjoy beef (or chicken, pork or turkey) our source has to give up its life for our sustenance. So it’s as much supply as efficient production. Right now, supply of market-ready beef is tight.

In fact, last week meatpackers paid the highest cash prices on record for live, market-ready cattle. The meat industry is grappling with tight cattle supplies due in part to drought in parts of the U.S. Great Plains. Add to that consumer demand – again especially over the holidays – that’s been high and you can expect a price spike in the grocery store. Analysts suggest the higher cattle prices likely will be passed along to you and me in the next several months.

Whatever is going on at the “farm gate” especially with food commodities where the market sets the price, not the farmer or rancher (unless they sell at a farmer’s market; the direct-market environment where the farmer can get away with setting his own price separate from the commodity markets), the mom or dad at the grocery store feels the impact a bit later. In the food industry, they call it sticky prices … in other words there is a bit of a lag time between commodity market impacts versus retail pricing.

In conclusion? Based on this latest marketbasket by Arizona Farm Bureau, I plan to really watch meat prices and take advantage of any deals that emerge. I might even stock up a bit.

I’m not too worried about eggs. They are the most economical protein I can get regardless of the time of the year I purchase them. And, the prices will most likely be cheaper this spring and summer than the $2-a-dozen I spent just this last weekend. After all, the holiday baking and family gatherings are over until the next big holiday celebration!

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