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.
| Because a full assessment of crop damage was not available at the time of this forecast, this update does not explicitly account for potentially higher corn and soybean prices due to crop damage from recent flooding in the Midwest. Estimates of the impact of potential supply disruptions on food prices will be included in this data series once an assessment of the flood losses becomes available.
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See
ERS data on CPI for food and CPI forecasts
May 2008 Prices
The CPI for all food increased 0.5 percent from April
to May 2008, 0.8 percent from March to April, and is now
5.1 percent higher than the May 2007 level. The food-at-home
index increased 0.5 percent in May and is now 5.8 percent
above last May, while the food-away-from-home index increased
0.4 percent and is now 4.3 percent above last May. The
all-items CPI increased 0.8 percent and is currently 4.2
percent above the May 2007 level.
Beef prices increased 1.5 percent in
May and are 1.5 percent above last May, as higher energy
and feed costs have begun to increase beef prices. Pork
prices increased 0.4 percent in May (the fourth increase
in the past 11 months) but are still down 0.6 percent
from last May’s level. Strong short-term pork supplies
have been the main factor behind recent 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
0.8 percent in May and are up 4.5 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 dropped 6.9 percent in May
but are still 18.2 percent above the May 2007 level.
Dairy prices were unchanged in May but are still
up 11.0 percent from the May 2007 level. Within the dairy category,
prices changed as follows in May: milk prices
were down 0.7 percent but are still 10.2 percent above last May’s
prices; cheese prices were up 1.4 percent and
are 14.0 percent above last May’s level; ice cream
and related product prices decreased a completely seasonal 0.3
percent but are still 5.9 percent above last May; and butter
prices increased 1.6 percent and are 3.8 percent above last May.
Fresh fruit prices increased a completely
seasonal 2.9 percent in May, largely due to a 5.0-percent
increase in orange prices and a 3.0-percent increase in
apple prices, while banana prices were down 0.4 percent.
The fresh fruit index is now up 4.7 percent overall from
last year at this time, with apple prices up 7.4 percent
and banana prices up 21.7 percent, while orange prices
are down 15.3 percent. The fresh vegetable
index decreased a completely seasonal 0.4 percent in May,
mostly due to decreases in lettuce and tomato prices.
Since last year at this time, fresh vegetable prices are
up 1.8 percent, with lettuce prices up 1.0 percent, tomato
prices up 4.0 percent, potato prices up 3.5 percent, and
other fresh vegetable prices up 0.5 percent.
Cereals and bakery product prices jumped an
additional 1.7 percent from April to May 2008 (the fifth consecutive
1-percent or higher monthly increase), with rice prices up 7.6
percent and cracker prices up 3.9 percent. Overall, cereals and
bakery product prices are up 10.5 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 0.1 percent in
May and are 5.5 percent above last May. Within the nonalcoholic
beverages category, prices changed as follows in May: carbonated
drink prices were down 2.6 percent but are still up 2.8
percent from May 2007; coffee prices increased
1.0 percent and are 8.5 percent higher than last May; and nonfrozen
noncarbonated juices and drinks prices were down
0.1 percent in May but are still 7.7 percent above the May 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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