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. |
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