Summary Findings

Food Price Outlook, 2020

This page summarizes the June 2020 forecasts, which incorporate the May 2020 CPI and PPI numbers. 

See Changes in Food Price Indexes, 2017 through 2020 for data files.

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

The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, increased by 0.002 percent from April 2020 to May 2020 before seasonal adjustment, up 0.1 percent above its May 2019 level. The CPI for all food was up 0.6 percent between April 2020 and May 2020, and food prices were 4 percent higher than the May 2019 level.

The degree of food price inflation varies depending if the food was purchased for consumption away from home or at home:

  • The food-away-from-home (restaurant purchases) CPI increased 0.4 percent in May and was 2.9 percent higher than May 2019; and
  • The food-at-home (grocery store or supermarket food items) CPI increased 0.8 percent from April to May 2020 and was 4.8 percent higher than last May.

Looking at 2020 so far compared to 2019 (reported as “Year-to-date avg. 2019 to avg. 2020”), food-at-home prices have increased 2.4 percent and food-away-from-home prices have increased 2.1 percent. The CPI for all food has increased an average of 2.3 percent. Of all the CPI food categories USDA’s Economic Research Service tracks, eggs have seen the largest relative price increase (8 percent); fresh fruits have had the largest relative price decrease (1.3 percent).

Given the relatively large increase in food-at-home prices in May, some forecasts have been revised upward this month. In 2020, food-at-home prices are now expected to increase between 2.5 and 3.5 percent. Food-away-from-home prices are still expected to increase in a range between 1.5 and 2.5 percent in 2020.

Recent Historical Overview
Between the 1970s and early 2000s, food-at-home prices and food-away-from-home prices increased at similar rates. Since 2009, however, the rates of growth in food-at-home and food-away-from-home prices have diverged. While food-at-home prices deflated in 2016 and 2017, monthly food-away-from-home prices have been rising consistently. These differences are partly caused by variations in the cost structure of restaurants versus supermarkets or grocery stores. Restaurant prices primarily reflect labor and rental costs, with only a small portion going toward the food served.

In 2018, retail food-at-home prices rose 0.4 percent. This was the first increase in 3 years, but the rate was still below the 20-year historical annual average of 2 percent. While prices for pork, other meats, dairy products, and processed fruits and vegetables declined in 2018, prices for all other food categories increased. Eggs had the largest annual average increase of 10.8 percent in 2018.

In 2019, retail food-at-home prices rose 0.9 percent. This was the second increase in 4 years, but the rate was still below the 20-year historical annual average of 2 percent. While prices for poultry, eggs, fats and oils, and fresh fruits declined in 2019, prices for all other food categories increased. Fresh vegetables had the largest annual average increase of 3.8 percent in 2019, and eggs had the largest annual average decrease of 10 percent.

CPI Forecast Changes This Month
Fourteen of the twenty-two CPI forecasts have been revised upward this month in response to the May CPI numbers. A few categories are highlighted here.

The CPI for meats, poultry, and fish increased 4.2 percent from April 2020 to May 2020 and is up 9.8 percent since May 2019. Processors have implemented health protocols for dealing with COVID-19 that might have hindered their ability to process cattle and hogs, although they have reouped much of the lost slaughter capacity. The CPI for beef and veal increased 10.9 percent from April 2020 to May 2020 while those for pork and poultry increased by 2.9 percent and 2.2 percent, respectively. The 2020 meats-poultry-and-fish CPI has been revised up and is expected to change in a range between 4 and 5 percent.

The CPI for fruits and vegetables increased 0.7 percent from April 2020 to May 2020 and is up 1.5 percent since May 2019. With some exceptions, most fresh-market vegetable growers rely on human labor to produce and place a crop into supply channels. It is anticipated that skilled labor will be scarcer and procedural changes to comply with recommended social distancing may reduce productivity. The CPI for fresh vegetables increased 0.9 percent from April 2020 to May 2020 while that for fresh fruit increased by 0.2 percent. The 2020 fruits and vegetables CPI has been revised up and is expected to increase as much as 1 percent. 

The CPI for dairy products increased 0.6 percent from April 2020 to May 2020. Year-to-date, it is up 3.5 percent. The 2020 dairy products CPI has been revised up and is expected to increase in a range between 3 and 4 percent.

Producer Price Index (PPI) for Food (not seasonally adjusted)

The Producer Price Index (PPI) is like 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 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 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. Because of 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 soon happen to the CPI.

The Economic Research Service does not 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.

For official USDA farm-level price forecasts, see: World Agricultural Supply and Demand Estimates at a Glance. For additional information, detailed explanations, and analyses of farm-level prices, see Economic Research Service Outlook publications including Livestock, Dairy, and Poultry, Oil Crops, Wheat, Fruit and Tree Nuts, and Vegetables and Pulses.

 

See Changes in Food Price Indexes, 2017 through 2020 for data files.

Last updated: Thursday, June 25, 2020

For more information, contact: Carolyn Chelius