Food Price Outlook, 2019
This page provides the following information for February 2019:
- 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 0.4 percent from January to February 2019 and is 1.5 percent above the February 2018 level. The CPI for all food rose 0.3 percent from January to February, and food prices were 2.0 percent higher than the February 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 0.4 percent in February and is 2.9 percent higher than February 2018; and
- The food-at-home (grocery store or supermarket food items) CPI rose 0.3 percent from January to February and is 1.2 percent higher than last February.
In 2018, retail food 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, and processed fruits and vegetables declined between 2017 and 2018, prices for all other major food categories increased. Eggs saw the largest annual average increase at 10.8 percent.
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 the grocery store. Food-at-home prices are expected to rise 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, eggs, fats and oils, fresh vegetables, and processed fruits and vegetables. Beef and veal, poultry, fish and seafood, sugars and sweets, nonalcoholic beverages, and other foods are all expected to increase but at rates lower than their 20-year historical averages. 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 rise between 2.0 and 3.0 percent in 2019.
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.
Pork prices declined 0.8 percent from January to February and are 1.4 percent below February 2018 levels. Greater quantities of hogs and pork production in the United States continue to put downward pressure on wholesale and retail pork prices. Retail pork prices are expected decrease between 3.0 and 2.0 percent in 2019.
Prices for poultry rose 1.2 percent from January to February and are 0.4 percent higher than this time last year despite lower broiler production since last year. Lower poultry production forecasts could place upward pressure on retail price inflation. Retail poultry prices rose 0.3 percent in 2018 and are expected to increase 0.5 to 1.5 percent in 2019.
Retail egg prices continued to fall, with a 0.3-percent decline from January to February and a 5.9-percent decline from the previous year. Retail egg prices are among the most volatile retail food prices, as they can be affected by seasonal demand. An increasing supply of eggs has put downward pressure on whole egg prices this year. Unlike the 10.8-percent increase in retail egg prices in 2018, retail egg prices are expected to decrease between 2.0 and 1.0 percent in 2019.
Dairy product prices decreased 0.2 percent from January to February but are 0.1 percent higher than February 2018 prices. While retail prices for cheese and related products were 1.7 percent lower than this time last year, retail milk and ice cream and related product prices were between 0.3 and 2.5 percent higher. Lower milk production is expected to have a positive impact on dairy product prices. Retail dairy prices fell 0.5 percent in 2018, but ERS expects retail dairy prices to rise 2.0 to 3.0 percent in 2019.
Fresh fruit prices declined 0.7 percent from January to February and are 0.5 percent lower than February 2018 prices. Compared with February 2018, retail prices in February 2019 were higher for most citrus fruits (with the exception of oranges) but lower for apples, bananas, and other fresh fruits. Despite a larger U.S. citrus crop in 2019, slower shipments to markets this winter drove retail prices higher. Even as cold-storage apple supplies and banana imports were down, lower retail prices may signal a lack of demand for these fruits this winter. Retail fresh fruit prices rose 1.0 percent in 2018, and ERS expects fresh fruit prices to increase 1.0 to 2.0 percent in 2019.
Fresh vegetable prices decreased 0.1 percent from January to February and are 5.8 percent higher than in February 2018. Compared with February 2018, prices in February 2019 for potatoes, lettuce, and other vegetables were between 4.8 and 14.5 percent higher, but tomato prices were 0.5 percent lower. Fresh vegetable prices rose 1.1 percent in 2018 but are expected to change between -1.0 and 0.0 percent in 2019.
In February, prices for cereals and bakery products rose 0.3 percent from the previous month and were 1.8 percent higher than February 2018. Although prices for fresh biscuits, rolls, muffins, and flour and prepared flour mixes declined, prices for breakfast cereals, rice, pasta, cornmeal, bread, and cakes, cupcakes and cookies rose between 0.4 percent and 0.9 percent from January to February. Prices rose 0.4 percent in 2018, and ERS expects prices for cereals and bakery products to increase 4.0 to 5.0 percent in 2019.
Key Month-To-Month Changes in the Food CPI
Beef and veal prices rose 0.1 percent from January to February and are 1.6 percent higher than this time last year. Lighter expected carcass weights and a reduced pace of marketing in the first month of 2019 has lowered the beef production forecast. Retail beef and veal prices rose 1.4 percent in 2018, and ERS expects retail prices for beef and veal to rise an additional 2.0 to 3.0 percent in 2019.
Fats and oils prices increased 0.1 percent from January to February but are 0.4 percent lower than in February 2018. While butter and margarine prices and salad dressing prices increased between 0.3 and 0.6 percent since January, prices of other fats and oils, including peanut butter, declined. Prices for fats and oils rose 0.1 percent in 2018, but ERS expects prices to fall 3.0 to 2.0 percent in 2019.
Prices for other foods rose 0.7 percent from January to February and were 0.6 percent higher than the same time last year. Prices increased for all major categories within other foods, including soups, frozen and freeze-dried prepared foods, snacks, spices, and baby foods. Compared with the same time last year, prices were higher for all major categories within other foods except soup and other miscellaneous foods. Prices for the other foods category rose 0.1 percent in 2018, and ERS predicts prices in this category to change 0.0 to 1.0 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 rose 0.2 percent, prices for processed foods and feeds increased 0.3 percent, but prices for finished consumer foods were down -0.5 percent from January to February 2019. Price changes at these earlier stages of production could be indicative of future trends at the retail level.
In February, cattle prices increased 2.4 percent since January but were down 4.7 percent since this time last year. Wholesale beef prices also increased in February, rising 1.9 percent, and are up 4.0 percent from the previous year. Farm-level cattle prices decreased 3.6 percent in 2018 but are expected to increase 2.5 to 3.5 percent in 2019. Wholesale beef prices, on the other hand, increased 1.7 percent in 2018 and are expected to decrease 2.5 to 1.5 percent in 2019.
Wholesale pork prices decreased 0.8 percent from January to February and are 4.0 percent lower than this time last year. Wholesale pork prices decreased 6.1 percent in 2018 and are expected to decline further by 2.5 to 1.5 percent in 2019.
Prices for farm-level eggs increased 11.3 percent from January to February, but price levels are 30.6 percent lower than February 2018 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. Farm-level egg prices increased 33.2 percent in 2018 but are expected to decrease 30.0 to 29.0 percent in 2019.
Prices for farm-level milk increased 1.1 percent from January to February and are unchanged from February 2018. Wholesale dairy prices also rose last month, increasing 1.0 percent from January to February, and are 3.1 percent higher than they were this time last year. Farm milk prices fell 10.6 percent in 2018 and are expected to decline 2.0 to 1.0 percent in 2019. Wholesale dairy prices declined 2.3 percent in 2018 and are forecast to change between 0.25 to 0.7 percent in 2019.
Farm-level soybean prices increased 3.5 percent from January to February and remain lower than the same time last year at 11.8 percent. Wholesale fats and oils prices also decreased on the month, falling 2.5 percent in February, and are 6.5 percent lower than February 2018 price levels. Farm-level soybean prices decreased 4.8 percent in 2018 but are expected to increase 1.5 to 2.5 percent in 2019. Prices for wholesale fats and oils decreased 2.5 percent in 2018 and are expected to decline an additional 5.5 to 4.5 percent in 2019.
Farm-level fruit prices decreased 3.4 percent in February and are 3.1 percent lower than in February 2018. Farm-level vegetable prices also decreased in February, falling 12.8 percent, but prices are 32.0 percent higher than they were this time last year. Farm-level fruit prices decreased 0.2 percent in 2018 and are expected to decrease an additional 2.0 to 1.0 percent in 2019. Farm-level vegetable prices decreased 1.7 percent in 2018 but are expected to increase 2.0 to 3.0 percent in 2019.
Farm-level wheat prices rose 2.0 percent from January to February and are 5.9 percent higher than they were in February 2018. Prices for wholesale wheat flour increased 0.7 percent between January and February and were 0.3 percent higher than February 2018. Farm-level wheat prices increased 14.2 percent in 2018 but are expected to remain the same or increase 0.0 to 1.0 percent in 2019. Wholesale wheat flour prices rose 0.9 percent in 2018 but are expected to decline 4.0 to 3.0 percent in 2019.