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Summary Findings

Food Price Outlook, 2016-17

This page provides the following information for July 2016:

Consumer Price Index (CPI) for Food (not seasonally adjusted)

The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, fell 0.2 percent from June to July 2016 but is 0.8 percent above the July 2015 level. The CPI for all food was flat from June to July. Food prices are 0.2 percent above the July 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 July and is 2.8 percent higher than July 2015; and
  • The food-at-home (grocery store or supermarket food items) CPI decreased for the third consecutive month, falling 0.1 percent from June to July and is 1.6 percent lower than last July. This represents the largest year-over-year decline since January 2010.

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.

In 2016, ERS predicts food-at-home (supermarket) prices to rise 0.0 to 1.0 percent—a rate of inflation that would again fall below the 20-year historical average of 2.5 percent. The forecast has been lowered due to recent declines in prices for beef and veal, poultry, and eggs. Lower transportation costs due to deflated oil prices as well as the strength of the U.S. dollar have placed additional downward pressure on food prices in the first half of 2016, resulting in more goods on the U.S. market at a lower price.

Looking ahead to 2017, supermarket prices are expected to rise between 1.0 and 2.0 percent. Despite the expectation for declining prices in 2016, beef and veal, poultry, and dairy prices are expected to rise in 2017. These forecasts are based on an assumption of normal weather conditions throughout the remainder of the year; 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. Also, a stronger 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 decreased 1.4 percent from June to July and are 7.7 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 greater 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. Aided by a strong (though somewhat weaker) dollar, lower prices have led U.S. beef to become more attractive abroad. ERS predicts beef and veal prices will decrease 5.0 to 4.0 percent in 2016 and increase 2.0 to 3.0 percent in 2017.

Prices for poultry decreased 0.3 percent from June to July and are 3.2 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 the Highly Pathogenic Avian Influenza (HPAI), broiler prices have been influenced by 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 decreased 0.1 percent from June to July and are 3.4 percent lower than they were at this time last year. Prices for other poultry, including turkey, were also down in July, decreasing 1.1 percent from June to July. ERS forecasts poultry prices to decrease 2.0 to 1.0 percent in 2016 but rise between 1.5 and 2.5 percent in 2017.

Egg prices decreased an additional 0.4 percent from June to July, and prices are 29 percent below July 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 was down due to smaller flock sizes and lower egg-laying rates per bird. However, as the industry recovers from this outbreak, prices at the retail level are expected to decline in 2016. ERS forecasts egg prices to decrease 15.0 to 14.0 percent in 2016 and to rise 1.0 to 2.0 percent in 2017.

Prices for fresh fruits fell 0.7 percent from June to July but are still 3 percent higher than in July 2015. The month-over-month decrease was partially driven by an decrease in the price for other fresh fruit, as other fresh fruit prices fell 2.5 percent from June to July. ERS expects fresh fruit prices to increase 1.5 to 2.5 percent in 2016 and 1.0 to 2.0 percent in 2017. Fresh vegetable prices fell slightly in July, decreasing 0.2 percent over June levels; prices are 1 percent higher than July 2015. While overall fresh vegetable prices decreased on the month, prices for potatoes and tomatoes increased. Potato prices rose 1.1 percent from June to July, and tomato prices increased 0.4 percent over the same time period. 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 0.5 and 1.5 percent in 2016 and to change between -0.5 and 0.5 percent in 2017.

See Changes in Food Price Indexes, 2014 through 2017 Excel icon (16x16).

Key Month-Over-Month Changes in the Food CPI

In July, pork prices rose 0.6 percent from the previous month and are still 1.9 percent lower year-over-year. In 2014, retail pork inflation was largely due to the effects of Porcine Epidemic Diarrhea virus (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. Pork production is expected to continue expanding in the second half of 2016, and ERS predicts pork prices to decrease between 1.5 and 0.5 percent in 2016 but rise 0.0 to 1.0 in 2017.

Prices for dairy products decreased 0.1 percent in July and remain 3.1 percent lower than they were in July 2015. Milk prices have declined month-over-month and year-over-year—down 0.4 percent from June to July and down 7 percent since July 2015. These reduced dairy prices have followed global patterns. However, dairy imports have recently declined from very high levels in the first quarter of 2016, and domestic demand for dairy is expected to be high. This could result in dairy prices beginning to rise in the second half of 2016. ERS predicts dairy product prices to decrease between 1.5 and 0.5 percent in 2016 but rise between 1.5 and 2.5 percent in 2017.

Fats and oils prices increased 0.4 percent from June to July and are also up 0.4 percent since July 2015. While prices for peanut butter continue to fall, prices for butter and margarine increased 1.3 percent from June to July. ERS predicts fats and oils prices to increase 0.0 to 1.0 percent in 2016 and 1.5 to 2.5 percent in 2017.

In July, prices for cereals and bakery products remained flat compared with the previous month, but prices are 0.8 percent lower than they were in July of 2015. ERS expects the prices for cereals and bakery products to rise between 1.0 and 2.0 percent in 2016 and 1.5 to 2.5 percent in 2017.

Prices for nonalcoholic beverages increased 0.4 percent from June to July but are down 0.5 percent since July 2015. Carbonated beverage prices increased 0.5 percent from June to July, while prices for coffee fell 0.3 percent over the same time period. ERS predicts nonalcoholic beverage prices to rise 0.5 to 1.5 percent in 2016 and to increase 0.0 to 1.0 in 2017.

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 decrease of 3.6 percent from June to July, and prices for finished consumer foods fell 0.5 percent over the same time period. However, prices for processed foods and feeds remained flat from June to July.

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 July, cattle prices decreased an additional 2.4 percent and are down 21.9 percent since this time last year. Wholesale beef prices also decreased in July, falling 11.7 percent on the month, and are down 19.4 percent from the previous year. In 2016, ERS predicts farm-level cattle prices to fall between 15.0 and 14.0 percent and wholesale beef prices to decrease by 14.0 to 13.0 percent. Farm-level cattle prices are expected to decrease 1.0 to 0.0 percent, and wholesale beef prices are expected to decline 3.5 to 2.5 percent in 2017.

Wholesale pork prices increased 2.5 percent from June to July, and prices are 3.6 percent higher than this time last year. Overall, pork production is higher, as litter sizes and hog inventories have recovered. ERS predicts that wholesale pork prices will decrease 2.0 to 1.0 percent in 2016 but increase 0.0 to 1.0 percent in 2017.

Prices for farm-level eggs increased an additional 50.8 percent from June to July. Prices are now 67.4 percent lower than July 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 55.0 to 54.0 percent in 2016 and to decrease an additional 1.0 to 0.0 percent in 2017.

Farm-level soybean prices decreased 4.9 percent from June to July but are now 5.5 percent above the July 2015 price level. Wholesale fats and oils prices decreased on the month, dropping 1 percent in July, and are 1.3 percent lower than July 2015 price levels. ERS predicts farm-level soybean prices to rise 7.0 to 8.0 percent in 2016 and 4.0 to 5.0 percent in 2017. Prices for wholesale fats and oils are expected to increase 1.0 to 2.0 percent in 2016 and to rise 1.5 to 2.5 percent in 2017.

The drought in California has raised concerns about rising produce prices at supermarkets or grocery stores. Farm-level fruit prices decreased 6.4 percent in July but are 14.7 percent higher than in July 2015. On the other hand, farm-level vegetable prices decreased, falling 2.4 percent, but prices are 6.8 percent higher than at this time last year. ERS predicts farm-level fruit prices to increase between 4.0 and 5.0 percent in 2016 but to decrease 6.0 to 5.0 percent in 2017. Vegetable prices are also expected to increase in 2016—between 2.0 and 3.0—but to decrease 7.0 to 6.0 percent in 2017. 

See Changes in Producer Price Indexes, 2014 through 2017 Excel icon (16x16).

Last updated: Wednesday, August 24, 2016

For more information contact: Annemarie Kuhns and David Levin