Food Price Outlook, 2021
This page summarizes the February 2021 forecasts, which incorporate the January 2021 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 0.4 percent from December 2020 to January 2021 before seasonal adjustment, up 1.4 percent from its January 2020 level. The CPI for all food increased 0.3 percent from December 2020 to January 2021, and food prices were 3.8 percent higher than in January 2020.
The level 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 0.3 percent in January 2021 and was 3.9 percent higher than January 2020; and
- The food-at-home (grocery store or supermarket food purchases) CPI increased 0.3 percent from December 2020 to January 2021 and was 3.7 percent higher than January 2020.
The 2021 CPI forecasts indicate a return to the lower rates of inflation that preceded the pandemic. 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. Inflation for all food categories is expected to be at or below their 20-year historical averages except for nonalcoholic beverages and other foods. Among retail food prices, only the forecast ranges for the two categories fats and oils and sugars and sweets were adjusted from January 2020. The only forecast ranges adjusted upward were for wholesale pork, farm-level soybeans, wholesale fats and oils, farm-level wheat, wholesale wheat flour, and farm-level fruit prices. Domestic demand has been a likely driver of increasing wholesale pork prices. Soybean and wheat prices have increased rapidly as stocks tightened due to strong international demand. Increased prices for soybeans and wheat have led to corresponding increases in prices of wholesale fats and oils and wholesale wheat flour. Prices for farm-level fruits increased 11.3 percent between December 2020 and January 2021 as price increases occurred for citrus fruits (4.3 percent), varieties of apples (up to 25.5 percent, depending on variety), and strawberries (49.2 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. The divergence is partly due to differences between the costs of serving prepared food at restaurants and retailing foods in supermarkets and grocery stores.
In 2019, retail food-at-home prices rose 0.9 percent. This increase was the second in 4 years, but the rate was still below the 20-year 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 10.0 percent.
In 2020, food-at-home prices increased 3.5 percent and food-away-from-home prices increased 3.4 percent. This convergence was largely driven by a rapid increase in food-at-home prices while food-away-from-home price inflation remained within 0.2 percentage points of 2019’s inflation rate. The CPI for all food increased 3.4 percent over this period.
In general, food price inflation in 2020 was much higher than in 2018 (which had an annual inflation rate of 0.4 percent), 2019 (0.9 percent), and the 20-year average (2.0 percent). Only the price of fresh fruits declined in 2020 (by 0.8 percent), while all other food categories increased in price. Prices for meat categories, poultry, fish and seafood, and dairy products increased between 4.4 percent (dairy products and other meats) and 9.6 percent (beef and veal). High food prices in 2020 increased the 20-year average inflation for several food-at-home categories (beef and veal, pork, other meats, poultry, fish and seafood, dairy products, and nonalcoholic beverages, as well as the aggregate categories of meat and meats, poultry, and fish).
CPI Forecast Changes This Month
CPI forecast ranges were largely unchanged this month. Few large changes in CPIs were reported by the U.S. Bureau of Labor Statistics in January, and uncertainty about the effect of the pandemic on food prices remains largely unresolved.
During 2020, retail meat prices were slow to decline following the highs reached at the onset of the COVID-19 pandemic. In fact, all meat prices except for the other meats category increased from December 2020 to January 2021—beef and veal and pork prices by 0.9 percent, poultry prices by 0.5 percent, and fish and seafood prices by 0.2 percent. Retail prices for fats and oils grew by 1.6 percent, which likely resulted from increasing wholesale prices for fats and oils. Sugar and sweets prices increased by 0.8 percent. Retail fats and oils prices are now predicted to increase between 1.0 and 2.0 percent, and sugar and sweets prices between 1.5 and 2.5 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 retail price changes, 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. Three major PPI commodity groups are of interest to food markets: 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 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 the downstream CPIs. Price volatility decreases as products move from the farm to the wholesale sector to the retail sector. Because of multiple processing stages in the U.S. food system, the CPI typically lags movements in the PPI. The PPI is thus a useful tool for 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. However, these have historically shown a strong correlation with the all-food and food-at-home CPIs.
Higher-than-expected exports of pork are predicted to increase wholesale pork prices. Increased domestic and international demand for soybeans and wheat have led to higher prices for both of these commodities at the farm level. As a result, prices for wholesale fats and oils and wholesale wheat flour have also increased because soybeans and wheat are significant inputs in the production of these intermediate products. Wholesale pork prices are expected to increase between 2.0 and 5.0 percent, farm-level soybean prices between 28.5 and 31.5 percent, wholesale fats and oil prices between 6.0 and 9.0 percent, farm-level wheat prices between 6.5 and 9.5 percent, and wholesale wheat flour prices between 4.0 and 7.0 percent.
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.