Summary Findings

Food Price Outlook, 2020

This page summarizes the March 2020 forecasts which incorporate the February 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, was up 0.3 percent from January 2020 to February 2020 and was 2.3 percent above the February 2019 level. The CPI for all food was up 0.3 percent between January 2020 and February 2020, and food prices were 1.8 percent higher than the February 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 0.2 percent in February and was 3 percent higher than February 2019; and
  • The food-at-home (grocery store or supermarket food items) CPI increased 0.4 percent from January to February and was 0.8 percent higher than last February.

Looking over 2020 so far compared to 2019 (reported as “Year-to-date avg. 2019 to avg. 2020”), food-at-home prices have increased 0.7 percent and food-away-from home have increased 1.8 percent. The CPI for all food has increased an average of 1.2 percent. Of all the CPI food categories USDA’s Economic Research Service tracks, eggs have seen the largest relative price increase (2.6 percent); fresh fruits have had the largest relative price decrease (2.4 percent). In general, food-at-home prices have continued to show low inflation during the first two months of the year.

With the recent outbreak of coronavirus in the United States, many new and rapidly changing factors could influence food prices over the rest of the year. The effects of the coronavirus outbreak on food prices will likely be different for food at home and food away from home. Grocery stores are experiencing increased demand while restaurants are seeing decreased demand.

The 2020 CPI forecast indicates a continuation of low inflation at grocery stores and supermarkets. While it is likely that month-to-month volatility will increase as supply chains and the economy adjust to the coronavirus outbreak, we do not now expect big changes to food-at-home prices for the year overall. In 2020, food-at-home prices are expected to increase between 0.5 and 1.5 percent, as potentially the fifth year in a row with deflating or lower-than-average inflating retail food prices.

The 2020 forecast for food away from home has been lowered moderately this month. Food-away-from-home prices are now 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 food-at-home and food-away-from-home price growth have diverged. While food-at-home prices deflated in 2016 and 2017, food-away-from-home prices have been rising consistently monthly. These differences are partly caused by variations in the cost structure of restaurants versus supermarkets or grocery stores. Restaurant prices primarily comprise 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 saw 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 saw the largest annual average increase, of 3.8 percent in 2019. Eggs saw the largest annual average decrease, of 10 percent in 2019.

CPI forecast changes this month
The 2020 forecast for food away from home has been adjusted downward. The food-away-from-home CPI increased 0.2 percent from January 2020 to February 2020 and was up 3 percent since February 2019. The 2020 food-away-from-home CPI is expected to increase in a range between 1.5 and 2.5 percent.

The 2020 forecast for sugar and sweets has been adjusted upward. The sugar-and-sweets CPI decreased 0.6 percent from January 2020 to February 2020 and was up 3 percent since February 2019. The 2020 sugar-and-sweets CPI is expected to increase in a range between 0.5 and 1.5 percent.

The 2020 forecast for other foods has been adjusted upward. The other-foods CPI increased 1.7 percent from January 2020 to February 2020 and was up 0.9 percent since February 2019. Other foods include frozen items, snacks, soups, condiments, and in-store prepared foods. The 2020 other-foods CPI is expected to change in a range between 0.5 and 1.5 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 happen to the CPI soon.

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: Wednesday, March 25, 2020

For more information, contact: Gianna Short