Summary Findings

Food Price Outlook, 2017

This page provides the following information for December 2016:

Consumer Price Index (CPI) for Food (not seasonally adjusted)

The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, was flat from November to December 2016 but is 2.1 percent above the December 2015 level. The all-items CPI is up since December 2015, as prices increased for many goods and services, housing costs went up 3 percent, transportation costs rose 2.5 percent, and medical care costs increased 4.1 percent. The CPI for all food was also flat from November to December, and food prices declined 0.2 percent compared with the December 2015 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 was up 0.2 percent in December and is 2.3 percent higher than December 2015; and
  • The food-at-home (grocery store or supermarket food items) CPI fell 0.2 percent from November to December and is 2 percent lower than last December.

Food-at-home prices declined overall in 2016, falling 1.3 percent below 2015 levels. This marks the first annual decline in supermarket prices since 1967. Looking at specific retail food categories, prices declined 21.1 percent for eggs, 6.3 percent for beef and veal, 4.1 percent for pork, and 2.3 percent for dairy and related products. However, not all foods declined in price – fresh fruit prices rose 2.2 percent and other foods rose 0.3 percent compared with 2015 prices.

The overall decline in retail food prices was due to several factors: increased production for many commodities, lower transportation costs as a result of deflated oil prices, and a strong U.S. dollar. A strong dollar affects domestic prices as it makes U.S. goods less desirable to foreign markets, leaving more potential exports on the domestic market.

While food-at-home prices declined in 2016, prices for food away from home increased 2.6 percent. Restaurant prices have been rising consistently month-over-month due, in part, to differences 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 food. For this reason, decreasing farm-level and wholesale food 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.

Looking ahead to 2017, supermarket prices are expected to rise between 0.0 and 1.0 percent. Despite declining prices in 2016, poultry, fish and seafood, and dairy prices are expected to rise in 2017. These forecasts are based on an assumption of normal weather conditions throughout the remainder of the year; however, severe weather or other unforeseen events could potentially drive up food prices beyond the current forecasts. In particular, drought conditions throughout the U.S. could have large and lasting effects on fruit, vegetable, dairy, and egg prices. Also, a stronger U.S. dollar could continue to make the sale of domestic food products overseas more difficult. This would increase the supply of foods on the domestic market, placing downward pressure on retail food prices.

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.

Beef and veal prices decreased 1.4 percent from November to December and are 5.6 percent lower than this time last year. The increased pace of cattle slaughter, especially during the second half of 2016, coupled with increased carcass weights have resulted in higher year-over-year beef production. This higher production and the large supplies of beef held in cold storage have resulted in downward pressure on prices throughout the cattle and beef complex. Prices of both feeder and fed cattle have been trending lower for most of 2016. These lower prices started to spill into the retail market around August 2016, continuing their downward spiral since then. Prices are expected to continue to decline in the near future. Prices declined 6.3 percent in 2016 and ERS predicts beef and veal prices to decrease an additional 2.5 to 1.5 percent in 2017.

In December, pork prices fell 1.5 percent from the previous month and are 4.2 percent lower year-over-year. Retail pork prices fell in 2016, largely due to ample supplies of other animal proteins available for domestic consumption. Lower beef prices are most likely adding pressure to lower pork prices. Pork prices declined 4.1 percent in 2016. USDA forecasts a 5.1 percent increase in pork production in 2017, and large pork supplies are expected to drive retail prices 1-2 percent lower this year. ERS predicts pork prices to fall an additional 2.0 to 1.0 in 2017.

Prices for fresh fruits decreased 1.5 percent from November to December and were down 1.3 percent compared with December 2015. Fresh fruit prices increased 2.2 percent in 2016. ERS expects fresh fruit prices to increase 1.0 to 2.0 percent in 2017. Fresh vegetable prices increased in December, rising 0.3 percent over November levels; however, prices are 5 percent lower than December 2015. While prices for potatoes and lettuce increased month to month, tomato prices fell 2.3 percent. Prices for fresh vegetables remained flat in 2016. However, ERS expects fresh vegetable prices to decrease between 4.0 and 3.0 percent in 2017. Factors, such as a stronger U.S. dollar and low oil prices, have mitigated the effect of the drought on retail fresh produce prices throughout 2016. For more detailed information on the California drought, see California Drought: Food Prices and Consumers.  

See Changes in Food Price Indexes, 2015 through 2017.

Key Month-Over-Month Changes in the Food CPI

Prices for poultry declined 0.9 percent from November to December and are 1.7 percent lower than last year. Retail chicken price inflation has remained relatively low into 2016 partly due to an increase in broiler production. Furthermore, a strong U.S. dollar has resulted in more chicken broilers remaining on the U.S. market which, in turn, places downward pressure on retail chicken prices. Poultry prices declined 2.7 percent in 2016. However, as the industry recovers from lower 2016 retail prices, ERS predicts prices to rise between 2.0 and 3.0 percent in 2017.

Egg prices decreased 0.8 percent from November to December, and prices are 33.8 percent below December 2015 levels. Retail egg prices are among the most volatile retail food prices, as they can be affected by seasonal demand. There was an upswing in 2015 that was primarily due to the Highly Pathogenic Avian Influenza (HPAI) outbreak, which decreased the table-egg-laying flocks by 36 million egg layers in the second quarter of 2015. In the first quarter of 2016, egg production was down due to smaller flock sizes and lower egg-laying rates per bird. As the industry recovered from this outbreak, with production close to pre-flu levels, egg prices fell 21.1 percent in 2016. ERS expects egg prices to decrease an additional 4.0 to 3.0 percent in 2017.

Prices for dairy products increased 0.5 percent in December but remain 1.3 percent lower than they were in December 2015. Retail milk prices have increased month-over-month—up 1.3 percent from November to December. However, retail milk prices declined year-over-year—down 1.6 percent since December 2015. Retail dairy prices declined 2.3 percent in 2016. These reduced dairy prices have followed global patterns. However, dairy imports have declined from very high levels in the first quarter of 2016, domestic demand for dairy is expected to be high, and exports are expected to strengthen for products with high skim-milk content (such as nonfat dry milk and whey products). ERS expects retail dairy product prices to rise between 1.5 and 2.5 percent in 2017.

Fats and oils prices rose 1.4 percent from November to December but are down 1.8 percent since December 2015. While butter prices declined 1.1 percent, prices are up 3.8 percent for salad dressing and 3.8 percent for peanut butter from November to December. Prices for fats and oils declined 0.6 percent in 2016. ERS predicts prices to decrease an additional 4.0 to 3.0 percent in 2017.

In December, prices for cereals and bakery products declined 0.2 percent compared with the previous month, and prices are 0.7 percent lower than they were in December of 2015. Prices for flour and prepared flour mixes decreased 0.7 percent from November to December, and prices for rice fell 1 percent. Prices for cereals and bakery products decreased 0.3 percent in 2016. However, ERS expects prices to rise between 0.25 to 1.25 percent in 2017.

Prices for nonalcoholic beverages decreased 0.2 percent from November to December and are down 0.9 percent since December 2015. Carbonated beverage prices increased 0.2 percent from November to December, and prices for coffee fell 1.3 percent over the same time period. Nonalcoholic beverage prices declined 0.4 percent in 2016. However, ERS predicts nonalcoholic beverage prices to increase 0.0 to 1.0 in 2017

Producer Price Index (PPI) for Food (not seasonally adjusted)

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. Unprocessed foods and feeds posted a monthly increase of 5.3 percent from November to December, prices for processed foods and feeds rose by 0.4 percent, and prices for finished consumer foods increased 0.5 percent over the same time period. This is an indication that food prices at the retail level could begin to rise in the near future.

Inflation rates for farm-level cattle and wholesale beef prices were high in 2014, as U.S. cattle herd sizes remained near historically low levels. Inflationary pressures have lessened, however, and farm-level cattle prices started to deflate in the second half of 2015 and continued their decline in 2016. In December, cattle prices increased 2.1 percent but are down 8.1 percent since this time last year. Wholesale beef prices decreased in December, falling 4.5 percent, but are up 1 percent from the previous year. In 2016, farm-level cattle prices fell 19.4 percent and wholesale beef prices decreased by 15.5 percent. ERS expects farm-level cattle prices to decrease an additional 10.0 to 9.0 percent, and wholesale beef prices are expected to decline 8.0 to 7.0 percent in 2017.

Wholesale pork prices rose 0.1 percent from November to December, but prices are 1.4 percent lower than this time last year. Overall, pork production is higher, as litter sizes and hog inventories have recovered. Wholesale pork prices declined 1.9 percent in 2016, but ERS predicts prices to increase 0.0 to 1.0 percent in 2017.

Prices for farm-level eggs increased 72.8 percent from November to December. Price levels are now 20.4 percent lower than December 2015 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. In 2015, prices were also affected by HPAI, which reduced the count of table-egg-laying birds in many Midwestern and Pacific Northwestern States. As the industry recovered, farm-level egg prices decreased 59.1 percent in 2016. ERS predicts prices to decrease an additional 25.0 to 24.0 percent in 2017.

Farm-level soybean prices increased 4.5 percent from November to December and are 16.4 percent above the December 2015 price level. Wholesale fats and oils prices increased on the month, rising 1.3 percent in December, and are 3.3 percent higher than December 2015 price levels. Farm-level soybean prices rose 2.9 percent in 2016 and are expected to increase an additional 1.0 to 2.0 percent in 2017. Prices for wholesale fats and oils decreased 0.8 percent in 2016, but ERS expects prices to rise 0.0 to 1.0 percent in 2017.

The drought in California has raised concerns about rising produce prices at supermarkets or grocery stores. Farm-level fruit prices fell 11.1 percent in December and are 1.2 percent lower than in December 2015. Farm-level vegetable prices rose, increasing 2.3 percent, but prices are still 28.2 percent lower than at this time last year. Farm-level fruit prices increased 11.6 percent in 2016 but are expected to decrease 8.0 to 7.0 percent in 2017. Vegetable prices also increased in 2016—rising 0.9 percent—but prices are expected to decrease 10.0 to 9.0 percent in 2017. 

See Changes in Producer Price Indexes, 2015 through 2017.