Food Price Outlook, 2016
This page provides the following information for March 2016:
Consumer Price Index (CPI) for Food (not seasonally adjusted)
The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, rose 0.4 percent from February to March 2016 and is 0.9 percent above the March 2015 level. However, the CPI for all food decreased from February to March—a decline of 0.3 percent. Food prices are 0.8 percent above the March 2015 level. The degree of food price inflation varies depending on whether the food was purchased for consumption away from home or at home.
- The food-away-from-home (restaurant purchases) CPI was up 0.2 percent in March and is 2.7 percent higher than March 2015; and
- The food-at-home (grocery store or supermarket food items) CPI decreased 0.7 percent from February to March and is 0.5 percent lower than last March.
ERS revises its food price forecasts if the conditions (such as the feed grain crop outlook or weather-related crop conditions) on which they are based change significantly. Despite the effects of the drought in the Southwest and California and the Highly Pathogenic Avian Influenza (HPAI), supermarket (food-at-home) prices rose 1.2 percent in 2015.
Food price inflation varied across food categories. Beef and veal prices continued to experience the effects of the Texas/Oklahoma drought. Farmers' decisions on calving and herd sizes were felt down the line due to the 16- to 18-month production process. Egg prices also saw larger-than-average increases, rising 17.8 percent due to the effect of HPAI on table-egg-laying flocks. In contrast, the effects of Porcine Epidemic Diarrhea virus (PEDv) on the hog industry have subsided, and the hog industry started to expand in 2015, resulting in a 3.9-percent decrease in retail pork prices.
In 2016, ERS now predicts food-at-home (supermarket) prices to rise 1.0 to 2.0 percent—a rate of inflation that would again fall below the 20-year historical average of 2.5 percent. These forecasts are based on an assumption of normal weather conditions; however, severe weather or other unforeseen events could potentially drive up food prices beyond the current forecasts. In particular, the drought in California could have large and lasting effects on fruit, vegetable, dairy, and egg prices. Conversely, if oil prices continue to remain low throughout 2016, subsequent decreases in production and transportation costs may be passed on to the retail level. Also, a strong U.S. dollar could continue to make the sale of domestic food products overseas more difficult. This would increase the supply of foods on the domestic market, placing downward pressure on retail food prices.
Changes to Food Category CPI Forecasts
The food-at-home CPI is an average of individual food CPIs, weighted by their relative importance or share of consumer expenditures.
Beef and veal prices increased 1.1 percent from February to March but are still 5.1 percent lower than this time last year. In previous months, price changes were affected by declining U.S. beef exports, which helped to increase the supply of beef on the U.S. market. This increased supply, along with weak beef demand, has placed downward pressure on retail beef prices. Additionally, favorable pasture conditions in some areas in 2015 and lower feed prices have allowed cattle producers to feed cattle longer and to hold cattle for herd expansion. ERS predicts beef and veal prices will decrease 2.0 to 1.0 percent in 2016.
In March, pork prices rose 0.1 percent from the previous month but are still 5.6 percent lower year-over-year. In 2014, retail pork inflation was largely due to the effects of PEDv, which had reduced the autumn number of hogs ready for production. In 2015, however, hog prices fell below 2014 figures, as there were signs of industry expansion and a lower volume of pork exports due to the strength of the U.S. dollar. This pattern has continued into 2016, and ERS now predicts pork prices to change between -0.5 to 0.5 percent in 2016.
Due to an expectation of lower price inflation for beef, veal, and pork, the meats forecast has been lowered and is now expected to rise 0.0 to 1.0 percent, and meats, poultry, and fish are now expected to rise between 0.5 to 1.5 percent in 2016.
Egg prices decreased 5.8 percent from February to March, but prices are still 0.7 percent above March 2015 levels. Retail egg prices are among the most volatile retail food prices, as they can be affected by seasonal demand. The upswing in 2015 was primarily due to the HPAI outbreak, which decreased the table-egg-laying flocks in the Midwest and Pacific Northwest by 11 percent (33 million egg layers). In the first quarter of 2016, egg production is forecast to be down due to smaller flock sizes and lower egg-laying rates per bird. Overall, as the industry continues to recover from this outbreak, prices at the retail level are expected to decline in 2016. ERS now forecasts egg prices to decrease 10.0 to 9.0 percent in 2016. (Note that this change in the forecast for eggs is singularly large, primarily due to changes in farm-level input forecasts used in the underlying multi-stage model).
See Changes in Food Price Indexes, 2013 through 2016 .
Key Month-Over-Month Changes in the Food CPI
Prices for poultry decreased 0.4 percent from February to March and are now 4 percent lower than last year. Retail chicken price inflation has remained relatively low into 2016 partly due to an increase in broiler production. While broilers have largely been unaffected by HPAI, broiler prices have been affected due to some countries instituting bans or partial bans on U.S. poultry exports. Furthermore, a strong U.S. dollar has resulted in more chicken broilers remaining on the U.S. market which, in turn, places downward pressure on retail chicken prices. Chicken prices fell 0.5 percent from February to March and are 4.7 percent lower than they were at this time last year. Prices for other poultry, including turkey, were also down in March, decreasing 0.2 percent from February to March. ERS forecasts poultry prices to increase 1.0 to 2.0 percent in 2016.
Prices for dairy products decreased 0.7 percent in March and remain 2.8 percent lower than they were in March 2015. Milk prices have declined month-over-month and year-over-year—down 1.3 percent from February to March and down 6 percent since March 2015. Reduced dairy prices have followed global patterns—with lower product demand for dairy in China, a strong U.S. dollar, and high milk supplies from the European Union, U.S. exports have decreased while imports have increased. ERS predicts dairy product prices to rise 2.0 to 3.0 percent in 2016.
Prices for fats and oils dropped 0.7 percent from February to March but are 0.2 percent higher than last March. In 2015, record-level oilseed production as well as increased import volume placed downward pressure on retail prices in this category. The relatively low level of price inflation for fats and oils has continued into 2016. ERS predicts fats and oils prices to increase 0.0 to 1.0 percent in 2016.
Prices for fresh fruits fell 2.8 percent from February to March but are 4.8 percent higher than in March 2015. ERS expects fresh fruit prices to increase 2.5 to 3.5 percent in 2016. Fresh vegetable prices decreased again in March, falling an additional 3.9 percent over February levels, but are still up 2.6 percent since March 2015. Factors, such as a stronger U.S. dollar and low oil prices, have mitigated the effect of the drought. ERS expects fresh vegetable prices to increase between 2.0 and 3.0 percent in 2016.
Prices for nonalcoholic beverages declined 0.6 percent from February to March and are up 0.3 percent since March 2015. Carbonated beverage prices decreased 0.1 percent from February to March, while prices for coffee decreased 0.7 percent over the same time period. ERS now predicts nonalcoholic beverage prices to rise 1.0 to 2.0 percent in 2016.
Producer Price Index (PPI) for Food (not seasonally adjusted)
The Producer Price Index (PPI) is similar to the CPI in that it measures price changes over time. However, instead of measuring changes in retail prices, the PPI measures the average change in prices paid to domestic producers for their output. The PPI collects data for nearly every industry in the goods-producing sector of the economy. Of particular interest to food markets are three major PPI commodity groups—unprocessed foodstuffs and feedstuffs (formerly called crude foodstuffs and feedstuffs), processed foods and feeds (formerly called intermediate foods and feeds), and finished consumer foods. These groups give a general sense of price movements across the various stages of production in the U.S. food supply chain.
The intermediate and final demand PPIs—measures of changes in farm and wholesale prices—are typically far more volatile than their counterparts in the CPI. Price volatility decreases as products move from the farm to the wholesale sector to the retail sector. Due to multiple stages of processing in U.S. food systems, the CPI typically lags movements in the PPI. Examining the PPI is thus a useful tool in understanding what may happen to the CPI in the near future.
ERS does not currently forecast industry-level PPIs for unprocessed, processed, and finished foods and feeds, but these have historically shown a strong correlation with the all-food and food-at-home CPIs. Unprocessed foods and feeds posted a monthly increase of 1.8 percent from February to March, and prices for processed foods and feeds rose by 0.1 percent from February to March. However, prices for finished consumer foods fell 0.7 percent from February to March.
Inflation rates for farm-level cattle and wholesale beef prices were high in 2014, as U.S. cattle herd sizes remained near historically low levels. Inflationary pressures have lessened, however, and farm-level cattle prices started to deflate in the second half of 2015. In March, cattle prices increased 3.7 percent but are down 15.7 percent since this time last year. Wholesale beef prices also increased in March, rising 2.8 percent on the month but are down 16.5 percent from the previous year. In 2016, ERS predicts farm-level cattle prices to fall between 8.5 to 7.5 percent and wholesale beef prices to decrease by 10.0 to 9.0 percent.
Wholesale pork prices decreased 1.2 percent from February to March; prices are now down 1.1 percent since this time last year, as the effects of PEDv have subsided. Overall, pork production is higher, as litter sizes and hog inventories have recovered. ERS predicts that wholesale pork prices will rise 0.0 to 1.0 percent in 2016.
Prices for farm-level eggs decreased 22.7 percent from February to March, following a 27.9-percent increase in February. Prices are still 33.5 percent lower than March 2015 levels. Egg prices are among the most volatile of food prices, typically peaking in the fourth quarter of the year and then falling in the first quarter of the new year. In 2015, prices were also affected by HPAI, which reduced the count of table-egg-laying birds in many Midwestern and Pacific Northwestern States. As the industry recovers, ERS forecasts farm-level egg prices to decrease 30.0 to 29.0 percent in 2016. (Note that this change in the forecast for eggs is singularly large, primarily due to changes in farm-level input forecasts used in the underlying multi-stage model).
Farm-level soybean prices increased 3 percent from February to March and are now 10.2 percent below the March 2015 price level. Wholesale fats and oils prices decreased on the month, falling 0.7 percent in March, and are 3.5 percent lower than March 2015 price levels. ERS predicts farm-level soybean prices to rise 0.0 to 1.0 percent in 2016. Prices for wholesale fats and oils are expected to increase 1.0 to 2.0 percent in 2016.
The drought in California has raised concerns about rising produce prices at supermarkets or grocery stores. However, farm-level fruit prices decreased 12.8 percent in March. Farm-level vegetable prices also decreased, falling 12 percent, and prices are still 8.8 percent higher than at this time last year. ERS predicts farm-level fruit prices to increase between 2.0 and 3.0 percent and vegetable prices to also increase between 1.0 to 2.0 percent in 2016.
See Changes in Producer Price Indexes, 2013 through 2016 .