Food price mystery: If grain, fuel are cheap, why aren't meat, milk cheaper?

Food costs "are quickly approaching financial-crisis lows on high supplies and the strength of the (U.S.) dollar," writes Berwyn-based food markets analyst Jonathan Feeney. in a report to clients of Athlos Research.

But not all these savings are reaching the consumer. While energy and feed costs are down -- "The grain complex is down 50 percent from its Spring 2008 peak" -- Feeney also notes that "proteins and dairy prices are yielding higher producer profits generally, with cattle and beef showing near all-time-high price/feed ratios." Corn, beans and fuel are cheap, but meat and milk prices haven't dropped nearly as far: that means fatter margins for farmers and slaughterhouses.

Hogs and soybeans are cheaper as China demand falls. Meanwhile, "heavy stockpiles" are piling up for "beef, pork... berries, peaches" and other produce. Yet cattle prices remain tight as less meat is now entering the system; ranchers, feeling the low demand, have sent fewer cattle to feedlots than at any time "since at least 1996." Milk prices are also more stable, due partly to the California drought that has redeuced cheese production, cancelling somewhat the impact of falling exports.