Food Price Outlook, 2019-2020
This page provides the September 2019 forecasts which incorporate the August 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 flat from July to August 2019 and is 1.7 percent above the August 2018 level. The CPI for all food was up 0.1 percent between July and August 2019, and food prices were 1.7 percent higher than the August 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 August and is 3.2 percent higher than August 2018; and
- The food-at-home (grocery store or supermarket food items) CPI decreased 0.1 percent from July to August but is 0.5 percent higher than last August.
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 other meats, poultry, eggs, fats and oils, and fresh fruits. Beef and veal, pork, 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, 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 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 pork prices decreased 0.9 percent from July to August 2019 but were up 0.5 percent since last August. Retail pork prices decreased 0.4 percent in 2018, and previous forecasts for 2019 had expected more of the same due to abundant supplies. However, recent demand—both domestic and abroad—has been strong, which has increased the price expectations for the future. Retail pork prices are up 0.6 percent year-to-date, compared with 2018 prices. The impact of the African Swine Fever outbreak in China is slowly filtering into the U.S. retail market, but so far this has only brought relatively lower prices closer to normal rates of price growth. In addition, prices are generally far less volatile at supermarkets than at the producer or wholesale levels. In light of these factors, the retail pork price forecasts for both 2019 and 2020 have been modestly raised one percent each – retail pork prices in 2019 are expected to increase in a range between 0.5 and 1.5 percent, and in 2020, prices are expected to increase in a range between 1.5 and 2.5 percent.
Retail poultry prices increased 0.1 percent from July to August 2019 but are down 0.7 percent since last August. The 2019 forecast remains unchanged, with prices expected to either decrease slightly or remain stable. The 2020 forecast for retail poultry prices has been adjusted upward with prices expected to increase in a range between 0.5 and 1.5 percent in 2020.
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 3.1 percent, prices for processed foods and feeds increased 0.4 percent, and prices for finished consumer foods were down 0.1 percent from July to August 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 decreased 4.2 percent from July to August 2019 and decreased 2.2 percent since August 2018. The wholesale beef PPI increased 0.4 percent this month and is up 4.6 percent since last year. An early August fire at a sizable beef processing plant may have partially contributed to both monthly changes. Cattle prices fell to adjust to lower slaughter capacity for the rest of 2019, and boxed-beef prices increased. The 2019 forecasts for both PPIs have been adjusted accordingly. The farm level cattle PPI is expected to decrease in a range between 1.0 and 2.0 percent for 2019. The wholesale beef PPI is expected to increase in a range of 0.5 to 1.5 percent for 2019.
The wholesale pork PPI increased 7.9 percent from July to August 2019 and is up 9.7 percent since August 2018. Year-to-date, however, the wholesale pork PPI is still down 0.9 percent. With prices expected to remain strong for the rest of the year, the 2019 forecast has been adjusted upward. The wholesale pork PPI is expected to increase in a range between 1.0 and 2.0 percent in 2019.
The farm level milk PPI increased 4.1 percent from July to August 2019 and is up 12.5 percent since August 2018. The wholesale dairy PPI increased 0.4 percent this month and is up 5.8 percent since last year. Both forecasts for 2019 have been adjusted upward this month. The farm level milk PPI is expected to increase in a range between 11.0 and 12.0 percent in 2019. The wholesale dairy PPI is expected to increase in a range between 4.0 and 5.0 percent in 2019.
The farm level wheat PPI decreased 9.7 percent from July to August 2019 and is down 21.5 percent since August 2018. The 2019 forecast has been adjusted downward this month due to persistent price declines. The farm level wheat PPI is expected to decrease between 7.0 and 8.0 percent in 2019.