Citrus disease drives US fruit prices higher

Washington - Fallout from a devastating citrus disease in Florida is the latest blow to American consumers struggling with record-high prices for some meats and overall higher food bills, the Department of Agriculture said on Wednesday.

In a monthly report on the food price outlook, the USDA said fresh fruit prices would jump by 5% to 6% this year, against an earlier forecast of a 3.5% to 4.5% increase.

The agency highlighted a 22.5% jump in citrus prices over the past year. As well as the lingering effects of a winter freeze in southern California, orange crops have been slammed by the plant disease known as citrus greening, which threatens to undermine Florida's $9bn citrus industry.

USDA evaluated expected increases in overall food, food-at-home and food-away-from-home prices and concluded that overall food inflation would be 2.5% to 3.5%, the same as last month's forecast.

Although in line with historic norms - since 1990, grocery store prices in the United States have risen by an average of 2.8% per year - the expected rate of increase is up from just 1.4% last year.

Dairy prices were forecast to increase by 3% to 4% on the year against an earlier 2.5% to 3.5% projection.

"Milk and dairy prices are higher due, in part, to strong foreign and domestic demand and lower output per cow in the Midwest," USDA said.

The agency in May raised its forecast for beef and veal prices, and maintained those levels in June. Beef prices are expected to rise by 5.5% to 6.5% and for pork prices to gain by 3% to 4%.

US beef prices are already up more than 9% so far in 2014 as cattle inventories fall and beef exports increase. Pork prices have shown similar gains in 2014.

"Most retail beef prices, on average, are at record highs, even after adjusting for inflation," USDA said. For pork, it added that the recent price surge - partly a reflection of a killer piglet virus sweeping the country - could be temporary since slaughter prices fell 10% in May.

But the sweet spot for the summer barbecue season could be poultry, where prices are relatively flat. USDA said it continues to track the effects of the ongoing drought in California on fruit, vegetable, dairy, and egg prices, and drought conditions in Texas and Oklahoma on beef prices.

"Retailer margins, having contracted since the drought, may expand in 2014 if input prices rise, which should contribute to inflation," it added.