Food Price Outlook, 2019-2020
This page provides the August 2019 forecasts which incorporate the July 2019 CPI and PPI numbers:
- Consumer Price Index (CPI) for Food (not seasonally adjusted)
- Producer Price Index (PPI) for Food (not seasonally adjusted)
The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, was up 0.2 percent from June to July 2019 and is 1.8 percent above the July 2018 level. The CPI for all food was up 0.1 percent between June and July 2019, and food prices were 1.8 percent higher than the July 2018 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 0.2 percent in July and is 3.2 percent higher than July 2018; and
- The food-at-home (grocery store or supermarket food items) CPI remained flat from June to July but is 0.6 percent higher than last July.
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 2.0 percent. While prices for pork, other meats, dairy products, and processed fruits and vegetables declined in 2018, prices for all other major food categories increased. Eggs saw the largest annual average increase of 10.8 percent in 2018.
Between the 1970s and early 2000s, food-at-home prices and food-away-from-home prices increased at similar rates. Since 2009, however, food-at-home and food-away-from-home price growth has diverged. While grocery prices have deflated in recent years, restaurant prices have been rising consistently month-over-month. These differences are due, in part, to 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 being served. For this reason, decreasing farm-level and wholesale food prices, which have exerted downward pressure on food-at-home 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 2019, price growth may continue to remain low at grocery stores and supermarkets. Food-at-home prices are expected to increase in a range between 0.5 and 1.5 percent, as potentially the fourth year in a row with deflating or lower-than-average inflating retail food prices. Several products could continue to see lower prices, including pork, other meats, poultry, eggs, fats and oils, and fresh fruits. Beef and veal, fish and seafood, processed fruits and vegetables, sugars and sweets, and other foods are all expected to increase but at rates lower than their 20-year historical averages. Fresh vegetables are expected to increase at rates greater than the 20-year historical average.
In addition to commodity prices, prices for other factors of production may influence retail food prices in 2019. Electricity and diesel costs, as well as many other costs associated with food production, transport, and retail sales, are expected to rise, placing upward pressure on prices. Food-away-from-home prices are expected to continue growing at a consistent rate and to increase in a range between 2.0 and 3.0 percent in 2019.
Updated 2020 forecasts indicate a continuation of low inflation at grocery stores and supermarkets. In 2020, food-at-home prices are expected to increase in a range 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. Fats and oils and processed fruits and vegetables could see lower prices. Many products are expected to see price increases in 2020 below the 20-year historical average, including beef and veal, pork, other meats, poultry, fish and seafood, fresh vegetables, sugars and sweets, nonalcoholic beverages, and other foods. Eggs, dairy products, fresh fruits, and cereal and bakery products are expected to increase in price in a range near the 20-year historical average in 2020. Food-away-from-home prices are expected to continue growing at a consistent rate and to increase in a range between 2.0 and 3.0 percent again in 2020.
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.
Retail poultry prices decreased 0.9 percent from June to July and are down 1.8 percent since July of 2018. Gains in production and average weights increased supply forecasts for the remainder of 2019. In 2018, poultry prices increased 0.3 percent; however, the July forecast for 2019 prices has been revised downward this month, and prices are expected to change in a range between -0.75 and 0.25 percent in 2019.
Fresh fruit prices fell 0.3 percent from June to July 2019 and are down 2.7 percent from July 2018. Fresh fruit prices increased 1.0 percent in 2018, and the forecast has been revised downward again this month, with prices expected to decrease in a range between 0.0 and 1.0 percent in 2019.
Cereals and bakery product prices increased 0.2 percent from June to July 2019, and prices were up 1.5 percent since last July. Last year's prices increased 0.4 percent. The 2019 forecast has been revised downward again this month, with cereals and bakery product prices expected to increase in a range between 1.5 and 2.5 percent in 2019.
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. Prices for unprocessed foods and feeds decreased 1.3 percent, prices for processed foods and feeds decreased 0.2 percent, and prices for finished consumer foods were down 0.4 percent from June to July 2019. Price changes at these earlier stages of production could be indicative of future trends at the retail level.
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 ERS Outlook publications including Livestock, Dairy, and Poultry, Oil Crops, Wheat, Fruit and Tree Nuts, and Vegetables and Pulses.
Changes to Food Category PPI Forecasts
The farm-level egg PPI decreased 6.2 percent since June and is down 56.3 percent since this time last year. While it increased 33.2 percent in 2018, the farm-level egg PPI has been revised downward again this month and is expected to decrease in a range between 37.0 and 38.0 percent in 2019.
The farm-level fruit PPI decreased 7.2 percent since June and is down 15.8 percent since July 2018. In 2018, the farm-level fruit PPI decreased 1.9 percent, and expectations for 2019 have been revised down this month. The PPI for farm-level fruit is expected to decrease in a range between 6.0 and 7.0 percent in 2019.