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

Food CPI, Prices, and Expenditures Briefing Room Analysis and Forecasts of the CPI for Food What's Behind the Forecasts? How Changes in Input Costs Affect Food Prices CPI Bias Three Types of Food Expenditures Series Measuring the ERS Food Expenditure Series

Food Price Outlook, 2008

In 2008, the Consumer Price Index (CPI) for all food is projected to increase 4.0 to 5.0 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 increased use of some food commodities, such as corn, for bioenergy uses.

Food-at-home prices are also forecast to increase 4.0 to 5.0 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

March 2008 Prices

The CPI for all food increased 0.1 percent from February to March 2008, 0.3 percent from January to February, and is now 4.5 percent higher than the March 2007 level. The food-at-home index decreased 0.1 percent in March but is still 4.7 percent above last March, while the food-away-from-home index increased 0.3 percent and is now 4.1 percent above last March. The all-items CPI increased 0.9 percent and is currently 4.0 percent above the March 2007 level.

Beef prices increased 0.6 percent in March as ground beef prices increased 0.5 percent, roast prices increased 1.0 percent, and steak prices increased 0.4 percent. Beef prices are 3.1 percent above last March's level, as higher energy and feed costs have begun to impact retail beef prices. Pork prices, though, dropped 0.8 percent in March (the seventh decrease in the past 9 months), mostly due to decreased bacon prices. Pork prices are down 1.7 percent from last March's level. Strong short-term pork supplies have been the main factor behind recent retail price declines, but pork prices may begin to rise over the next 2 years as current supplies are sold and future production slows due to higher production costs. Poultry prices increased 0.1 percent in March and are up 5.4 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 6 months.

Egg prices increased 0.5 percent in March and are 29.9 percent above the March 2007 level.

Dairy prices decreased 1.0 percent between February and March 2008 but are still up 11.0 percent from the March 2007 level. Within the dairy category, prices changed as follows in March: milk prices were down 2.2 percent but are still 13.3 percent above last March's prices; cheese prices decreased 0.4 percent but are still 12.5 percent above last March's level; ice cream and related product prices decreased 0.7 percent but are still 2.8 percent above last March; and butter prices decreased 3.7 percent and are 2.0 percent below last March.

Fresh fruit prices decreased 1.7 percent in March, largely due to a 6.7-percent decrease in other fresh fruit prices, while apple prices were up 0.2 percent, banana prices up 9.2 percent, and orange prices up 1.4 percent. The fresh fruit index is now up 2.0 percent overall from last year at this time, with apple prices up 7.5 percent and banana prices up 14.9 percent, while orange prices are down 19.8 percent. The fresh vegetable index decreased 1.2 percent in March, mostly due to decreases in lettuce and potato prices. Since last year at this time, fresh vegetable prices are down 0.3 percent, with other fresh vegetable prices down 6.6 percent and lettuce prices down 3.2 percent. However, potato prices are up 3.4 percent and tomato prices are up 18.2 percent.

Cereals and bakery product prices increased 1.2 percent from February to March 2008, with flour prices up 3.2 percent and bread prices up 2.1 percent. Overall, cereals and bakery product prices are up 8.1 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 0.9 percent in March and are 4.3 percent above last March. Within the nonalcoholic beverages category, prices changed as follows in March: carbonated drink prices were down 1.3 percent but are still up 2.2 percent from March 2007; coffee prices increased 2.6 percent and are 4.8 percent higher than last March; and nonfrozen noncarbonated juices and drinks prices were unchanged in March but are still 2.3 percent above the March 2007 level.