Food Price Outlook, 2017-18
This page provides the following information for June 2017:
- Consumer Price Index (CPI) for Food (not seasonally adjusted)
The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, was up 0.1 percent from May to June 2017 and is 1.6 percent above the June 2016 level. The CPI for all food declined 0.1 percent from May to June, and food prices were 0.9 percent higher than the June 2016 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 flat in June but is still 2.2 percent higher than June 2016; and
- The food-at-home (grocery store or supermarket food items) CPI fell 0.3 percent from May to June and is 0.1 percent lower than last June.
Food-at-home prices and food-away-from-home prices have recently diverged. Restaurant prices have been rising consistently month-over-month due, in part, to differences in the cost structure of restaurants versus supermarkets or grocery stores (with lower year-over-year prices). Restaurant prices primarily comprise labor and rental costs with only a small portion going toward food. For this reason, decreasing farm-level and wholesale food prices have had less of an impact on restaurant menu prices.
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 2017, supermarket prices are expected to change between -0.25 and 0.75 percent. Despite declining prices in 2016, poultry, fish and seafood, 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, drought or flood conditions throughout the U.S. 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.
Looking ahead to 2018, retail food prices are expected to rise between 1.0 to 2.0 percent. While fats and oils and processed fruits and vegetables could potentially decline in price, prices for meats, eggs and dairy are expected to increase. Despite the expectation for rising prices in 2018, price levels overall could still be lower than they were in 2015.
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 increased 2.9 percent from May to June but are still 0.8 percent lower than this time last year. The increased pace of cattle slaughter, especially during the second half of 2016, coupled with increased carcass weights, has resulted in higher year-over-year beef production. This higher production and the large supplies of beef held in cold storage have resulted in downward pressure on prices throughout the cattle and beef complex. Prices of both feeder and fed cattle trended lower for most of 2016. Anticipated beef production for 2017 is now lower than originally forecast, but it is still expected to exceed the 2016 level. ERS predicts beef and veal prices to decrease 2.0 to 1.0 percent in 2017 but increase 2.0 to 3.0 percent in 2018.
In June, pork prices rose 0.9 percent from the previous month but are still down 0.8 percent since June 2016. Despite declining pork chop prices, bacon prices increased 0.5 percent and ham prices increased 4.8 percent in June. Lower beef prices are most likely adding pressure to lower pork prices. USDA forecasts a 4.9-percent increase in pork production in 2017, and large pork supplies are expected to drive retail prices down 1.5 to 0.5 percent in 2017 but increase 1.5 to 2.5 percent in 2018.
Egg prices decreased 1.1 percent from May to June and are 10 percent below June 2016 levels. Retail egg prices are among the most volatile retail food prices, as they can be affected by seasonal demand. In 2017, more egg-laying birds and an increased number of eggs per hen has continued to place downward pressure on prices. ERS expects egg prices to decrease 9.0 to 8.0 percent in 2017 but increase 1.0 to 2.0 percent in 2018.
Prices for dairy products decreased 0.8 percent in June but are 0.2 percent higher than they were in June 2016. Retail milk prices decreased 0.8 percent from May to June, cheese and related product prices fell 0.2 percent, and ice cream and related product prices fell 2.1 percent. However, dairy imports have declined from very high levels in the first quarter of 2016, and exports have strengthened, and will continue to do so, for products with high skim-milk content (for example, nonfat dry milk and whey products). Domestic demand for most dairy products has recently been below previous annual levels but is expected to recover during the year. ERS expects retail dairy product prices to rise between 0.0 and 1.0 percent in 2017 and increase an additional 1.5 to 2.5 percent in 2018.
Fats and oils prices fell 0.3 percent from May to June and are up 1.1 percent since June 2016. Butter prices decreased 0.9 percent from May to June, salad dressing prices fell 0.9 percent, and peanut butter prices were down 0.9 percent. ERS predicts fats and oils prices to change between -0.5 to 0.5 percent in 2017 and decrease 1.0 to 0.0 percent in 2018.
Key Month-Over-Month Changes in the Food CPI
Prices for poultry were flat from May to June but are 0.3 percent higher than last year. Despite high broiler production, many broilers have low weights which, along with larger birds demanding higher prices, has contributed to higher retail poultry prices. While prices are expected to increase at the retail level, price increases are still expected to be lower than the 20-year historical average of 2.1 percent. ERS predicts prices to rise between 0.5 and 1.5 percent in 2017 and increase an additional 1.5 to 2.5 percent in 2018.
Prices for fresh fruits decreased 1.9 percent from May to June but are up 1.1 percent compared with June 2016. Despite rising prices for apples, bananas, and citrus, prices for all other fresh fruit decreased 9 percent since May. ERS expects fresh fruit prices to change between -0.5 to 0.5 percent in 2017 and increase 2.0 to 3.0 percent in 2018. Fresh vegetable prices fell 1.3 percent from May to June, but prices are still 1.6 percent higher than June 2016. ERS expects fresh vegetable prices to decrease between 1.5 and 0.5 percent in 2017 but increase 0.0 to 1.0 percent in 2018. Factors, such as a stronger U.S. dollar, low oil prices, and seasonal availability have placed downward pressure on retail fresh produce prices.
In June, prices for cereals and bakery products were flat compared with the previous month but are 0.3 percent lower than they were in June 2016. Prices for breakfast cereal fell 0.4 percent, retail rice prices rose 0.7 percent, and prices for flour and prepared flour mixes fell 1.2 percent from May to June. Due to an increase in farm-level wheat prices and a decreased forecast of wheat imports, ERS expects cereals and bakery products prices to rise between 0.5 to 1.5 percent in 2017 and increase 3.0 to 4.0 percent in 2018.
Prices for nonalcoholic beverages decreased 0.8 percent from May to June and are up 0.8 percent since June 2016. Carbonated beverage prices decreased 0.9 percent from May to June, but prices for coffee fell 1.5 percent over the same period. ERS predicts nonalcoholic beverage prices to increase 0.0 to 1.0 in 2017 and an additional 0.0 to 1.0 percent in 2018.
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 increase of 0.5 percent from May to June, prices for processed foods and feeds rose 1.6 percent, and finished consumer foods were up 1.0 percent over the same period.
Inflationary pressures lessened for farm-level cattle and wholesale beef prices in 2016 and are expected to continue to be low in 2017. In June, cattle prices decreased 3.7 percent but are up 5.2 percent since this time last year. Wholesale beef prices increased in June, rising 8.7 percent, and are also up 6.6 percent from the previous year. ERS expects farm-level cattle prices to rise between 2.0 to 3.0 percent in 2017 and 0.0 to 1.0 percent in 2018. Wholesale beef prices are expected to increase 1.5 to 2.5 percent in 2017 but decrease 3.0 to 2.0 percent in 2108.
Wholesale pork prices rose 8.6 percent from May to June and are 0.5 percent higher than this time last year. Overall, pork production is higher, placing downward pressure on prices in 2016—wholesale pork prices declined 2.1 percent. However, ERS predicts wholesale pork prices to increase 1.0 to 2.0 percent in 2017 and 2.5 to 3.5 percent in 2018.
Prices for farm-level eggs increased 3 percent from May to June. Price levels are 38.9 percent higher than June 2016 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 the Highly Pathogenic Avian Influenza (HPAI), which reduced the count of table-egg-laying birds in many Midwestern and Pacific Northwestern States. ERS predicts farm-level egg prices to increase 0.0 to 1.0 percent in 2017 and increase an additional 2.0 to 3.0 percent in 2018.
Farm-level soybean prices decreased 3.7 percent from May to June and are 20.6 percent below the June 2016 price level. Wholesale fats and oils prices increased on the month, rising 0.2 percent in June, and are 3.2 percent higher than June 2016 price levels. Farm-level soybean prices are expected to change between -0.5 to 0.5 percent in 2017 and rise 3.5 to 4.5 percent in 2018. ERS expects prices for wholesale fats and oils to rise 5.0 to 6.0 percent in 2017 but decrease 2.0 to 1.0 percent in 2018.
Farm-level fruit prices fell 6 percent in June but are 4.3 percent higher than in June 2016. Farm-level vegetable prices also fell in June, decreasing 8.1 percent. Farm-level vegetable prices are now 1 percent higher than they were this time last year. Farm-level fruit prices are expected to increase 1.0 to 2.0 percent in 2017 but decrease 7.5 to 6.5 percent in 2018. Farm-level vegetable prices are expected to decrease 5.0 to 4.0 percent in 2017 and decrease an additional 8.0 to 7.0 percent in 2018.