Food Price Outlook, 2020
This page summarizes the October 2020 forecasts, which incorporate the September 2020 Consumer Price Index and Producer Price Index numbers.
See Changes in Food Price Indexes, 2018 through 2021 for data files.
The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, increased by 0.1 percent from August 2020 to September 2020 before seasonal adjustment, up 1.4 percent from its September 2019 level. The CPI for all food did not change between August 2020 and September 2020, and food prices were 3.9 percent higher than the September 2019 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 increased 0.6 percent in September and was 3.8 percent higher than September 2019; and
- The food-at-home (grocery store or supermarket food items) CPI decreased 0.4 percent from August to September 2020 and was 4.1 percent higher than September 2019.
In 2020 thus far, compared to 2019 (reported as "Year-to-date avg. 2019 to avg. 2020"), food-at-home prices have increased 3.4 percent and food-away-from-home prices have increased 2.8 percent. The CPI for all food has increased an average of 3.1 percent. Of all the CPI food categories that USDA’s Economic Research Service tracks, the category of beef and veal has had the largest relative price increase (10.2 percent); fresh fruits have had the largest relative price decrease (1.2 percent).
Many prices have been relatively slow to retreat from the highs reached as a result of the pandemic, so some forecasts have been revised upward this month. A few have returned to their pre-COVID-19 trends more rapidly than expected and have been adjusted upward or downward, depending on whether their changes have been positive or negative. In 2020, food-at-home prices are expected to increase between 2.5 and 3.5 percent and food-away-from-home prices are expected to increase between 2.0 and 3.0 percent. In 2021, food-at-home prices are expected to increase between 1.0 and 2.0 percent and food-away-from-home prices are expected to increase between 2.0 and 3.0 percent.
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, their rates of growth have diverged. While food-at-home prices deflated in 2016 and 2017, monthly food-away-from-home prices have been rising consistently since then. These differences are partly caused by variations in the cost structure of restaurants versus those of supermarkets and grocery stores.
In 2018, retail food-at-home prices rose 0.4 percent. This price increase was the first in 3 years, but the rate was still below the 20-year historical annual average of 2.0 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 price increase was the second in 4 years, but the rate was still below the 20-year historical annual average of 2.0 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 10.8 percent.
CPI Forecast Changes This Month
Forecast ranges for eight of the 22 CPI categories for 2020 have been revised upward this month, with only eggs being revised downward. The forecast range for food-away-from-home was adjusted upward, while all other categories remained unchanged for 2021.
Forecast price ranges for poultry and the category of fish and seafood have been revised upward this month. These categories are combined to form additional, overall categories, for which forecasts have been revised upward as well. These categories include meats; and meats, poultry, and fish. Meat prices have continued to decline, but the pace at which they are declining is not fast enough to reach the average 2020 prices that were expected before the pandemic. For example, beef and veal prices decreased 4.6 percent from July to August 2020 and another 1.4 percent from August to September 2020, but year-to-date prices are still 10.2 percent above average 2019 prices. Slaughterhouses have recouped much of the slaughter capacity lost as a result of the pandemic, and prices are expected to continue to decrease through 2020. However, they will likely decrease at a slower rate than they increased this spring.
CPI growth for fruits and vegetables has been lower than the 20-year average of 2.0 percent. The month-over-month decreases in CPI for the aggregate category of fruits and vegetables suggests the CPI will continue to grow more slowly than the historical average. This aggregate decline is driven by a 0.5 percent drop in the price of fresh vegetables. No-growth and a 0.1-percent increase in the price of fresh fruits and processed fruits and vegetables only partially offset this decline in the aggregate category.
The CPI for fats and oils has come close to returning to historical trend, with a month-over-month change of 0.3 percent. The CPI for nonalcoholic beverages has returned more slowly to the pre-pandemic trend (a 1.2 percent average annual increase) as the forecast for its CPI remains between 3.0 and 4.0 percent.
Egg prices are now predicted to increase from 4.5 to 6.5 percent in 2020—down from the 6.0 to 7.0 percent prediction in September. Egg prices reached a high in April 2020 but have been trending downward in the months since. These declines are influenced at least in part by decreased demand from foodservice.
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 outputs. 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 USDA 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, 2018 through 2021 for data files.