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U.S. faces higher food price inflation in 2014, led by meats

Jonatahan Sitte manages the meat department at Econo Foods in Wahpeton, N.D. David Samson / The Forum

WASHINGTON (Reuters) - The severe drought in California could have a lasting effect on U.S. fruit, dairy and egg prices, while prices for meats, especially beef, look likely to continue climbing, the U.S. Department of Agriculture said on Friday.

The agency said overall U.S. food price inflation for 2014, including food bought at grocery stores and food bought at restaurants, would rise by 2.5 percent to 3.5 percent in 2014.

That is up from 2013, when retail food prices were almost flat, but in line with historical norms.

"The food-at-home consumer price index (CPI) has already increased more in the first four months of 2014 then it did in all of 2013," USDA said.

It said the California drought "could potentially have large and lasting effects on fruit, vegetable, dairy and egg prices." The most populous U.S. state is in its third year of what officials are calling a catastrophic drought.

The upcoming Memorial Day holiday weekend marks the unofficial start of the summer grilling season, and USDA said home chefs will face sticker shock.

Beef and veal prices, already at record highs, are forecast to increase by 5.5 percent to 6.5 percent and pork prices to rise by 3 percent to 4 percent.

Both forecasts were raised in the latest report. The beef and veal CPI is up almost 10 percent so far in 2014.

"The drought in Texas and Oklahoma has worsened somewhat in the last month, providing further complications to the beef production industry," USDA said.

A major factor for rising pork prices is the Porcine Epidemic Diarrhea Virus (PEDv), responsible for more than 7 million U.S. piglet deaths in the past year.

Sweets lovers and caffeine addicts will see some relief, however, since global prices for sugar and coffee remain low.

The agency forecast sugar and sweets prices to rise by 1 percent to 2 percent in 2014 and prices for non-alcoholic beverages to rise by 1.5 percent to 2.5 percent.

"It appears supermarkets are maintaining minimal price inflation on packaged food products, possibly in an effort to keep prices competitive in light of rising cost pressures for most perishable items," USDA said.