Food Price Outlook, 2019
This page provides the following information for December 2018:
- 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 0.3 percent from November to December 2018 but is 1.9 percent above the December 2017 level. The CPI for all food rose 0.3 percent from November to December, and food prices were 1.6 percent higher than the December 2017 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 December and is 2.8 percent higher than December 2017; and
- The food-at-home (grocery store or supermarket food items) CPI rose 0.3 percent from November to December and is 0.6 percent higher than last December.
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. Retail food-at-home prices are expected rise between 1.0 and 2.0 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, processed fruits and vegetables, and nonalcoholic beverages. Beef and veal, poultry, fish and seafood, sugars and sweets, 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.
Beef and veal prices declined 0.4 percent November to December and are 0.6 percent lower than this time last year. Beef production is expected to continue expanding due to slightly higher expected carcass weights, combined with more cattle put on the market and greater expected cow slaughter. Although feeder cattle prices were stronger than previously expected, prices throughout the cattle and beef complex in 2018 remained below 2017 levels. Lower prices at earlier stages of production are likely to place downward pressure on retail beef and veal prices in 2019. Retail beef and veal prices rose 1.4 percent in 2018. ERS expects retail prices for beef and veal to rise an additional 2.0 to 3.0 percent in 2019.
Egg prices rose 1.3 percent from November to December but are 2.2 percent below December 2017 levels. Retail egg prices are among the most volatile retail food prices, as they can be affected by seasonal demand. Since 2017, more egg-laying birds and an increased number of eggs per hen placed downward pressure on prices. However, recent price increases at the farm and wholesale level may indicate that retail egg prices will continue to rise over the next several months. Egg prices rose 10.8 percent in 2018, but prices are expected to change between -1.0 and 0.0 percent in 2019.
Key Month-Over-Month Changes in the Food CPI
In December, pork prices fell 1.6 percent from the previous month, and prices are 1.4 percent lower than in December 2017. Lower beef prices are most likely adding pressure to lower pork prices as consumers make meat substitutions. Pork production is expected to continue expanding as more pork processing facilities come on line. As a result, pork prices declined 0.4 percent in 2018, and ERS expects pork prices to change between -0.75 and 0.25 percent in 2019.
Prices for poultry rose 0.1 percent from November to December but are 1.4 percent lower than this time 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 1.0 to 2.0 percent in 2019.
Dairy product prices increased 0.4 percent from November to December but are 0.1 percent lower than December 2017 prices. While retail prices for milk fell 0.5 percent, cheese and related product prices rose 0.1 percent, and ice cream and related product prices increased 1.1 percent from November to December. Dairy exports have strengthened but are expected to be limited due to recent tariffs imposed by Mexico and China. Retail dairy prices fell 0.5 percent in 2018, but ERS expects retail dairy prices to rise 3.0 to 4.0 percent in 2019.
Fats and oils prices decreased 0.1 percent from November to December and are 0.5 percent lower than in December 2017. The overall decrease was predominantly driven by a 1.0-percent decrease in butter and margarine prices from November to December. 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 fresh fruits rose 0.5 percent from November to December but are down 0.7 percent compared with December 2017. Despite citrus fruit prices falling 2.5 percent, apple prices were up 1.6 percent, banana prices increased 1.4 percent, and other fresh fruit prices were 1.9 percent higher from November to December. Fresh fruit prices rose 1.0 percent in 2018, and ERS expects fresh fruit prices to increase an additional 2.0 to 3.0 percent in 2019.
Fresh vegetable prices increased from November to December, rising 3.4 percent, and are 4.6 percent higher than in December 2017. Prices were up across the board—potato prices rose 0.4 percent, lettuce prices were up 13.4 percent, tomato prices increased 5.5 percent, and other fresh vegetable prices increased 1.3 percent from November to December. Fresh vegetable prices rose 1.1 percent in 2018 and are expected to increase an additional 2.5 to 3.5 percent in 2019.
In December, prices for cereals and bakery products rose 0.4 percent from the previous month and were 1.7 percent higher than December 2017. Although prices for rice, pasta, and cornmeal declined, prices for breakfast cereal rose 1.3 percent and bread prices increased 1.2 percent from November to December. Prices rose 0.4 percent in 2018, and ERS expects prices for cereals and bakery products to increase 2.0 to 3.0 percent in 2019.
Prices for nonalcoholic beverages rose 0.3 percent from November to December and are 1.4 percent higher than December 2017. Coffee prices rose 0.6 percent from November to December, and carbonated beverage prices increased 0.1 percent over the same period. While nonalcoholic beverage prices were flat in 2018, prices are expected to change between -0.25 and 0.75 percent in 2019.
Prices for other foods fell 0.3 percent from November to December, but this category is 0.3 percent higher than the same time last year. Prices for soup increased 1.6 percent, prices for frozen and freeze-dried prepared foods were up 0.2 percent, but prices for snacks decreased 1.9 percent from November to December. 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 3.2 percent, prices for processed foods and feeds increased 0.3 percent, and prices for finished consumer foods were up 2.6 percent from November to December. Price changes at these earlier stages of production could be indicative of future trends at the retail level. Therefore, an inflationary trend for many foods at the retail level could be expected in the coming months.
In December, cattle prices increased 3.5 percent since November but are down 2.7 percent since this time last year. Wholesale beef prices decreased in December, falling 1.8 percent, but are up 5.5 percent from the previous year. Farm-level cattle prices decreased 3.6 percent in 2018 but are expected to increase 1.0 to 2.0 percent in 2019. Wholesale beef prices, on the other hand, increased 1.7 percent in 2018 and are expected to increase 3.0 to 4.0 percent in 2019.
Wholesale pork prices increased 2.1 percent from November to December but are 4.2 percent lower than this time last year. Wholesale pork prices decreased 6.1 percent in 2018 but are expected to rise 1.0 to 2.0 percent in 2019.
Prices for farm-level eggs decreased 1.4 percent from November to December, and price levels are 26.7 percent lower than December 2017 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 5.0 to 4.0 percent in 2019.
Prices for farm-level milk decreased 3.0 percent from November to December, and prices are 12.5 percent lower than they were in December 2017. Wholesale dairy prices also fell last month, decreasing 0.6 percent from November to December, and remain 1.5 percent lower than they were this time last year. Farm milk prices fell 10.6 percent in 2018 but are expected to increase 1.0 to 2.0 percent in 2019. Wholesale dairy prices declined 2.3 percent in 2018 and are forecast to decrease 1.5 to 0.5 percent in 2019.
Farm-level soybean prices increased 5.4 percent from November to December but are still 8.3 percent lower than the December 2017 price level. Wholesale fats and oils prices also increased on the month, rising 1.4 percent in December, but are 2.5 percent lower than December 2017 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 3.0 to 2.0 percent in 2019.
Farm-level fruit prices increased 43.8 percent in December and are 26.3 percent higher than in December 2017. Farm-level vegetable prices also increased in December, rising 28.5 percent, and prices are 52.8 percent higher than they were this time last year. Farm-level fruit prices decreased 0.2 percent in 2018 but are expected to increase 10.0 to 11.0 percent in 2019. Farm-level vegetable prices decreased 1.7 percent in 2018 but are expected to increase 8.0 to 9.0 percent in 2019.
Farm-level wheat prices rose 2.6 percent from November to December and are 18.5 percent higher than they were in December 2017. Prices for wholesale wheat flour decreased, falling 0.4 percent from November to December, but prices are 0.1 percent higher than December 2017. Farm-level wheat prices increased 14.2 percent in 2018 and are expected to increase an additional 4.0 to 5.0 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.