Food Price Outlook, 2013
Despite the severe drought in the Midwest, retail food prices were mostly flat in 2012. The food-at-home Consumer Price Index (CPI) increased a total of 0.5 percent in 2012. Prices rose for beef and veal, poultry, fruit, and other foods in 2012; however, prices fell for pork, eggs, vegetables, and nonalcoholic beverages. For the remaining food categories, prices were unchanged for the most part. The drought has affected prices for corn and soybeans as well as other field crops which should, in turn, drive up retail food prices. However, the transmission of commodity price changes into retail prices typically takes several months to occur, and most of the impact of the drought will be realized in 2013.
Based on current conditions, ERS's inflation forecast for both all food and food-at-home (grocery store) prices in 2013 is for increases of 2.5 to 3.5 percent. This forecast means that prices are likely to increase more than in 2012, but that overall inflation is expected to be near the historical average for both indexes. Inflation is expected to remain strong, especially in the first half of 2013, for most animal-based food products due to higher feed prices. For most food categories not directly affected by the 2012 drought, however, inflation is expected to be at or even below normal levels.
See Changes in Food Price Indexes, 2011 through 2013 .
March 2013 Prices (Not Seasonally Adjusted)
The CPI for all food did not change from February to March, was unchanged from January to February, and is now 1.5 percent above the March 2012 level. The food-at-home CPI decreased 0.1 percent in March and is up 1 percent from last March, while the food-away-from-home (restaurant) index increased 0.2 percent in March and is up 2.3 percent from last March. The all-items CPI rose 0.3 percent in March and is 1.5 percent above the March 2012 level. The overall direction of prices in 2013 continues to be mixed, and the food-at-home CPI is unchanged for the first quarter of the year.
Beef prices were up 0.1 percent in March and are 2.7 percent above last March, with steak prices up 1.7 percent and ground beef prices up 3.1 percent. Pork prices increased 0.6 percent in March and are 1.6 percent below last March's level. As seen with cattle, hog liquidation due to the drought resulted in temporarily lower retail pork prices. Pork prices have increased steadily thus far in 2013 in response to higher feed prices (and low hog inventory) and are expected to continue to increase throughout the year.
Poultry prices increased 0.3 percent in March; poultry prices are 3.9 percent above prices last year at this time, with chicken prices up 4.2 percent and other poultry prices (including turkey) up 3 percent. Fish and seafood prices were up 0.7 percent from February to March and are 0.6 percent above the March 2012 level. Due to strong global production and flat wholesale prices for many major seafood commodities, ERS has revised its forecast for fish and seafood downward to 2 to 3 percent.
Egg prices fell 1.8 percent in March and are now 3.3 percent above the March 2012 level. Egg prices are expected to fully reflect the impact of higher feed corn prices sooner than many other food products but are also subject to strong seasonal swings in pricing.
Dairy prices were down 0.6 percent from February to March, compared with a 0.4-percent decrease from January to February. Dairy prices are now 0.5 percent below the March 2012 level. Within the dairy category, prices changed as follows in March: milk prices decreased 0.4 percent and are 1.4 percent above last March's prices; cheese prices were down 0.4 percent and are 1.3 percent below last March's level; ice cream and related product prices dropped 1.5 percent and are 0.3 percent below last March's level; and butter prices decreased 0.7 percent this month and are 1 percent above last March. It is increasingly apparent that the surge in fluid milk prices in the final quarter of 2012 primarily reflected the impact of the drought and higher feed prices. While higher prices are still expected for processed dairy products such as cheese and ice cream, ERS has revised its forecast for dairy prices downward to 2.5 to 3.5 percent.
Fresh fruit prices decreased 1.3 percent in March, and the fresh fruit index is up 4.6 percent from last year at this time, with apple prices up 12.9 percent, banana prices down 0.5 percent, citrus fruit prices up 3.2 percent, and other fresh fruit prices up 3.9 percent. The fresh vegetable index decreased 0.4 percent in March. Since last year at this time, fresh vegetable prices are up 7.1 percent, with potato prices down 10 percent, lettuce prices up 22.2 percent, tomato prices up 7.2 percent, and other fresh vegetable prices up 9.3 percent. Vegetable prices are rebounding in 2013 after deflating for most of 2012. Processed fruit and vegetable prices fell 0.8 percent in March and are unchanged from the March 2012 level.
Cereal and bakery product prices increased 0.1 percent from February to March and are up 0.9 percent from last year at this time, with bread prices up 2 percent and breakfast cereal prices down 0.8 percent over the past year. The impact of dry conditions in the Midwest on wheat prices has been moderate compared with other commodities, and ERS has revised its forecast for cereals and bakery products downward to 2 to 3 percent. Sugar and sweets prices were up 0.1 percent in March and are 1.3 percent below the March 2012 level. Prices for nonalcoholic beverages, including coffee and carbonated beverages, are down 0.1 percent in March and are down 0.5 percent from last year.
The index for fats and oils was down 0.8 percent from February to March and is 1.4 percent below the March 2012 level. Soybean prices faced pressure in 2012 from both decreased production in South America as well as the drought in the U.S. Inflation for this category is expected to moderate in 2013, following two consecutive years of significant price increases, and ERS now expects prices for fats and oils to rise 1 to 2 percent in 2013.