Commodity prices have been mixed, but a burger may cost more

2014-02-02T06:00:00Z 2014-02-03T15:28:07Z Commodity prices have been mixed, but a burger may cost moreJoseph S. Pete joseph.pete@nwi.com, (219) 933-3316 nwitimes.com
February 02, 2014 6:00 am  • 

The stock market soared last year, as did some commodity prices, such as for eggs, milk and vegetables.

But consumers could see some relief in 2014 because of projected drops in crude oil and other commodity prices, according to members of The Times Board of Economists. But wholesale beef and some other food products remain on the rise, which should translate into higher prices at supermarkets and restaurants.

U.S. stocks rose by more than 30 percent as the economy improved last year, said Mark Ennes, a wealth management adviser at Merrill Lynch's Merrillville office. Merrill Lynch expects  stocks will continue to see double-digit gains, but also forecasts a modest decline in a broad array of commodity prices because of Federal Reserve tapering, a stronger dollar, oversupply and slower growth in China.

But Merrill Lynch still predicts overseas growth, particularly in Russia, Korea, Turkey, Brazil and South Africa.

"Emerging markets are becoming more consumer-oriented," Ennes said. "The middles classes are coming into vogue and starting to spend money."

Agricultural commodities have been buoyed in recent years, because people abroad are getting wealthier and eating more meat, which requires the production of more corn and soybeans for feedstock, said Porter County farmer Tim Stoner.

But row crop yields were high this year, and the ample production is expected to lower grain commodity prices over the next six months, which means less income for farmers. Farmers, however, anticipated lower prices would return and are in good shape financially, Stoner said.

"Over the last several years, balance sheets have looked excellent on farms," he said. "It's never been better."

Livestock producers also will benefit because they will be able to buy corn and soy to feed their cattle at much lower prices than a year ago.

Wholesale soy, wheat, wheat flour, vegetable, dairy, and fat and oil prices all are expected to come down in 2014. But the wholesale prices of beef, pork, poultry, eggs and milk are expected to increase by as much as 6.5 percent this year, according to a United States Department of Agriculture Economic Research Service estimate.

"The number of herds of cattle is at an all-time low, and it's going to affect hamburger prices," said John Barney, president of Barney Enterprises, which operates several Wendy's restaurants in the region. "We sell quite a bit of red meat, and it's an important part of the business."

Wholesale beef prices dipped by 0.4 percent last year, but had soared by 10 percent in 2012 and are projected to rise by as much as 2.5 percent this year. The high prices could have a ripple effect, if consumers switch to cheaper meats, said Dave Wilkinson, president of the Strack & Van Til grocery chain.

"Beef prices are just out of control," Wilkinson said. "Short-term poultry prices are fairly flat, but if consumers shift to new proteins, it will put pressure on those prices."

Consumers might have to pay more for a T-bone or a chicken breast, but they should see some relief form higher prices when filling up their gas tanks.  Crude oil spot prices are expected to drop by about $3 a barrel over the next two years, Luke Oil president Tom Collins Sr. said.

By 2015, consumers should be buying gas for an average price of $3.39 a gallon, or about 3.4 percent less than what they paid last year.

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