US dairy and meat prices to rise in 2010

Food price inflation will return to the US in 2010, led by an increase in milk, beef, pork and chicken prices.

Food prices could rise as much as 6% next year, and that meat and dairy will be affected by rising demand and prices for corn and animal feed, as well as lower supplies caused by production cuts made in 2008 and 2009, according to Michael Swanson, a senior economist at Wells Fargo.

Protein inflation will be much higher than anticipated, he said. Corn is a proxy for feed costs, and at present the value of all meat and dairy production is below the price of feed on a long-term relative basis.

The USDA, however, are estimating a much milder food price inflation in the coming year.

Ephraim Leibtag, the USDA's food price forecaster, said an economic recovery in 2010 might bring about a 3% to 4% increase in the price of food, due to rising demand.

Leibtag said he expects those gains to come mainly from increases in seafood and produce, but that beef and pork would likely rise less than 2%. If there is no economic recovery, any broad increase in food prices is less likely.