Food Price Outlook, 2019-2020
This page provides the December 2019 forecasts which incorporate the November 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 down 0.1 percent from October to November 2019 and is 2.1 percent above the November 2018 level. The CPI for all food was down 0.1 percent between October and November 2019, and food prices were 2.0 percent higher than the November 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 November and is 3.2 percent higher than November 2018; and
- The food-at-home (grocery store or supermarket food items) CPI decreased 0.3 percent from October to November and is 1.0 percent higher than last November.
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 in 2019, 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 poultry, eggs, fats and oils, and fresh fruits. Beef and veal, other meats, fish and seafood, dairy products, processed fruits and vegetables, cereals and bakery products, 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 have been consistently growing at a higher rate than food-at-home prices. The 2019 food-away-from-home forecast has been revised upward this month with prices expected to increase in a range between 2.5 and 3.5 percent in 2019.
The 2020 CPI forecast indicates 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, other meats, poultry, fish and seafood, fresh vegetables, sugars and sweets, nonalcoholic beverages, and other foods. Pork, dairy products, fresh fruits, and cereal and bakery products are expected to increase in a price range near the 20-year historical average in 2020. Food-away-from-home prices are expected to increase in a range between 2.0 and 3.0 percent in 2020.
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, the rates of food-at-home and food-away-from-home price growth have diverged. While food-at-home prices deflated in 2016 and 2017, food-away-from-home 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.
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.
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. 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.
Dairy product prices were up 0.4 percent in November and have increased 2.6 percent since November of 2018. Dairy product prices in 2019 are expected to increase in a range between 0.75 and 1.75 percent.
Sugar and sweets prices were down 0.1 percent from October to November but have increased 3.4 percent since November 2018. Year-to-date, sugar and sweets prices have increased 2.0 percent since 2018. Sugar and sweets prices in 2019 are now expected to increase in a range between 1.5 and 2.5 percent.
Cereals and bakery product prices decreased 0.1 percent in November but were up 1.1 percent since November 2018. Year-to-date, prices have increased 1.4 percent. The forecast has been adjusted downward this month with cereals and bakery product prices in 2019 expected to increase in a range between 1.0 and 2.0 percent.
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 foodstuffs and feedstuffs increased 1.0 percent, prices for processed foods and feeds increased 0.9 percent, and prices for finished consumer foods were up 1.3 percent from October to November 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 cattle PPI increased 3.6 percent from October to November and is up 2.9 percent since November 2018. The wholesale beef PPI increased 4.8 percent since last month and is up 7.6 percent since November 2018. Both forecasts have been revised upward this month on stronger prices over the last quarter of 2019. The 2019 farm-level cattle PPI is now expected to change in a range between -2.0 and 1.0 percent. The 2019 wholesale cattle PPI is now expected to increase in a range between 0.5 and 3.5 percent.
The wholesale pork PPI is up 2.4 percent since October and is up 11.6 percent since this time last year. Year-to-date, the wholesale pork PPI is up 3.6 percent. The forecast has been revised upward this month. The 2019 wholesale pork PPI is expected to increase in a range between 2.0 and 5.0 percent.
The farm-level milk PPI increased 1.7 percent from October to November and is up 6.7 percent since November 2018. The forecast has been trimmed in slightly this month with the 2019 farm-level milk PPI expected to increase in a range between 8.5 and 11.5 percent.