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Briefing Rooms

Food CPI, Prices, and Expenditures: Analysis and Forecasts of the CPI for Food

Contents
 

Food Price Outlook, 2008

In 2008, the Consumer Price Index (CPI) for all food is projected to increase 4.5 to 5.5 percent, as retailers continue to pass on higher commodity and energy costs to consumers in the form of higher retail prices. The main factors behind higher food commodity costs include stronger global demand for food, increased U.S. agricultural exports resulting from stronger demand and a weaker dollar, weather-related production problems in some areas of the world, and the increased use of some food commodities, such as corn, for bioenergy uses.

Food-at-home prices are forecast to increase 5.0 to 6.0 percent, while food-away-from-home prices are forecast to increase 3.5 to 4.5 percent in 2008. The all-food CPI increased 4.0 percent between 2006 and 2007, the highest annual increase since 1990. Food-at-home prices, led by eggs, dairy, and poultry prices, increased 4.2 percent, while food-away-from-home prices rose 3.6 percent in 2007.

See ERS data on CPI for food and CPI forecasts

June 2008 Prices

The CPI for all food increased 0.6 percent from May to June 2008, 0.5 percent from April to May, and is now 5.3 percent higher than the June 2007 level. The food-at-home index increased 0.6 percent in June and is now 6.1 percent above last June, while the food-away-from-home index increased 0.5 percent and is now 4.4 percent above last June. The all-items CPI increased 1.0 percent and is currently 5.0 percent above the June 2007 level.

Beef prices increased 1.7 percent in June and are 3 percent above last June, as higher energy and feed costs continue to increase beef prices. Pork prices jumped 1.8 percent in June but are still down 0.6 percent from last June’s level. Strong short-term pork supplies have been the main factor behind recent year-over-year retail price declines, but pork prices may rise over the next 2 years as current supplies are sold and future production slows due to higher production costs. Poultry prices increased 0.4 percent in June and are up 2.8 percent from last year at this time. Higher feed and energy costs in 2007 and early 2008 have caused poultry prices to rise faster than normal over the past 18 months.

Egg prices were unchanged in June but are still 23.2 percent above the June 2007 level.

Dairy prices were up 0.6 percent in June and are up 9.2 percent from the June 2007 level. Within the dairy category, prices changed as follows in June: milk prices were up 0.4 percent and are 6.9 percent above last June’s prices; cheese prices were up 1.4 percent and are 14.7 percent above last June’s level; ice cream and related product prices were unchanged but are still 4.9 percent above last June; and butter prices decreased a completely seasonal 1.2 percent but are still 3.8 percent above last June.

Fresh fruit prices decreased a completely seasonal 2.1 percent in June, largely due to a 9.6-percent decrease in other fresh fruit prices, while apple prices were up 6.2 percent, banana prices up 0.5 percent, and citrus fruit prices up 7.0 percent. The fresh fruit index is now up 3.1 percent overall from last year at this time, with apple prices up 11.1 percent and banana prices up 20.4 percent, while citrus fruit prices are down 2.5 percent. The fresh vegetable index increased 2.9 percent in June, mostly due to increases in potato and tomato prices. Since last year at this time, fresh vegetable prices are up 8.4 percent, with lettuce prices up 3.1 percent, tomato prices up 22.2 percent, potato prices up 6.7 percent, and other fresh vegetable prices up 5.5 percent.

Cereals and bakery product prices increased 0.6 percent from May to June 2008 (following five consecutive 1-percent or higher monthly increases), with rice prices up 6.8 percent and flour prices up 1.0 percent. Overall, cereals and bakery product prices are up 10.4 percent from last year at this time as higher wheat, corn, and energy prices have pushed production costs for these products up sharply over the past few months. Sugar and sweets prices were up 0.2 percent in June and are 5.0 percent above last June. Within the nonalcoholic beverages category, prices changed as follows in June: carbonated drink prices were up 0.9 percent and are up 3.6 percent from June 2007; coffee prices decreased 0.2 percent but are still 8.2 percent higher than last June; and nonfrozen noncarbonated juices and drinks prices were down 1.2 percent in June but are still 2.4 percent above the June 2007 level.

 

Background on the CPI for Food

Although ERS analyzes changes in retail prices for individual food items, sometimes it is useful to record and analyze a measure of change for the overall level of food prices.

The Consumer Price Index (CPI) is the most publicized and most widely used measure of the general level of prices in the U.S. economy. The CPI is a composite measure of the level of average prices paid by urban consumers for a defined market basket of goods and services, including food.

The CPI for food at home is a component of the full CPI and is the principal indicator of changes in retail food prices. Policymakers, both public and private, closely follow the CPI for food consumed at home and its changes, which measure price inflation for food items. The CPI for food consumed at home also affects policy evaluation because the effects of many current and proposed policies are evaluated based on CPI measures. To contribute to the analysis of government and commercial decisionmakers, ERS estimates the future direction of changes in the CPI for all food, food at home, and food away from home (see data on the CPI for food forecasts).

The food price level can be influenced by changes in costs incurred by food system firms. Changes in input costs can translate directly into changes in the CPI or may have little or no effect. Researchers at ERS not only produce forecasts of the CPI but also analyze the impact of economic factors on changes in the CPI, including changes in firms' costs.

 

 

For more information, contact: Ephraim Leibtag

Web administration: webadmin@ers.usda.gov

Updated date: July 23, 2008