AP EXPLAINS: How the food surplus stuffed US freezers

DES MOINES, Iowa – Warehouses, distribution centres and grocery stores are overflowing with some food staples, such as milk, eggs and frozen fruits and vegetables, the result of increased production and decreased exports. Take dairy, for example: With the most milk ever produced in the U.S. — about 24 billion gallons — that means there are record amounts of butter and cheese. The glut of food means lower prices for consumers.

Here’s a short explanation of how the surplus came about and where it all goes:

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HIGH PRICES, HIGH PRODUCTION

Two years ago, high prices for milk, pork, poultry and eggs encouraged farmers to expand livestock operations. Plus, American consumers were opening their wallets and trade partners were willing to keep buying U.S. products. Add to that the cheap cost of animal feed that encouraged farmers to boost livestock’s weight before taking them to market.

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RISING DOLLAR, BIRD FLU TAKE A BITE

But agriculture is a cyclical business: The relative high value of the dollar makes U.S. products more expensive to importers, so they’ve slowed their buying. Last year’s bird flu crisis also caused many trade partners to stop taking eggs and turkey and chicken meat, and while production of eggs has returned, demand isn’t fully restored. Those factors and others have suppressed demand, but the cows keep pumping out milk and veggies continue to grow, resulting in a surplus of certain types of food.

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COOLING DEMAND LEADS TO CHILLY SURPLUS

Step into the freezer. The 1.24 billion pounds of cheese in refrigerated warehouses is the highest for the month of August since U.S. records began in 1921, and includes nearly 770 million pounds of American cheese and 25.7 million pounds of Swiss. Other stockpiles include:

— 322 million pounds of butter (up 52 per cent from a year ago)

— 1.52 billion pounds of frozen fruit, including 377 million pounds of strawberries and 313 million pounds of blueberries

— 1.31 billion pounds of frozen poultry (chicken and turkey), up 4 per cent from a year ago.

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ONE BENEFICIARY: FOOD BANKS

Not everything is being stored. The USDA announced in August it was buying 11 million pounds of cheese for $20 million and sending it to food banks and food pantries through a government nutrition assistance program. Farm organizations also are boosting their efforts to improve U.S. exports and move some of the glut out of the country.

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PRICES LIKELY TO STAY LOW

Food prices depend on factors beyond just supply, such as weather and oil prices. Given those unpredictable factors, the USDA expects supermarket prices overall to rise between 1 and 2 per cent next year for beef, veal, pork, eggs, poultry and fresh fruit.