Summary Findings

Food Price Outlook, 2016-17

This page provides the following information for October 2016:

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

The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, rose 0.1 percent from September to October 2016 and is 1.6 percent above the October 2015 level. While the CPI for all food also rose 0.1 percent from September to October, food prices are 0.4 percent lower compared with the  October 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 0.1 percent in October and is 2.4 percent higher than October 2015; and
  • The food-at-home (grocery store or supermarket food items) CPI was flat from September to October and is 2.3 percent lower than last October. Retail food prices have remained flat or decreased for 8 of the first ten months in 2016.

Food-away-from-home 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.

In 2016, ERS predicts food-at-home (supermarket) prices to decrease between 1.25 and 0.25 percent, marking the first year since 1967 that retail food prices could reflect annual deflation. The forecast has been lowered due to recent declines in prices for beef and veal, poultry, and eggs. Lower transportation costs due to deflated oil prices as well as the strength of the U.S. dollar have placed additional downward pressure on food prices in the first half of 2016. A strong U.S. dollar makes U.S. goods less desirable to foreign markets, leaving more potential exports on the domestic market. Comparing the 2015 average price level with the 2016 level to date, the CPI for food-at-home is down 1.1 percent.

Looking ahead to 2017, supermarket prices are expected to rise between 0.5 and 1.5 percent. Despite the expectation for 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, the drought in California 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 1.5 percent from September to October and were 7.5 percent lower than this time last year. In previous months, price changes were affected by declining U.S. beef exports, which helped to increase the supply of beef on the U.S. market. This greater supply, along with weak beef demand, has placed downward pressure on retail beef prices early in 2016. Additionally, favorable pasture conditions in some areas in 2015 and lower feed prices have allowed cattle producers to feed cattle longer and to hold cattle for herd expansion. Furthermore, with larger supplies of beef currently being held in cold storage, prices are expected to continue to decline in the near future. ERS now predicts beef and veal prices will decrease 6.75 to 5.75 percent in 2016 and decrease 2.0 to 1.0 percent in 2017.

In October, pork prices fell 1.2 percent from the previous month and are 5.3 percent lower year-over-year. In 2014, retail pork inflation was largely due to the effects of Porcine Epidemic Diarrhea virus (PEDv), which had reduced the autumn number of hogs ready for production. In 2015, however, hog prices fell below 2014 figures, as there were signs of industry expansion and a lower volume of pork exports due to the strength of the U.S. dollar. Pork production is expected to continue expanding in the second half of 2016, and ERS predicts pork prices to decrease between 4.25 and 3.25 percent in 2016. Although lower wholesale pork prices and a moderating exchange rate will increase the number of pork exports, ERS expects pork prices to fall an additional 1.0 to 0.0 in 2017.

Prices for poultry were flat from September to October but are 2 percent lower than last year. Retail chicken price inflation has remained relatively low into 2016 partly due to an increase in broiler production. While broilers have been largely unaffected by HPAI, broiler prices have been influenced by some countries instituting bans or partial bans on U.S. poultry exports. 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. Chicken prices were flat from September to October but are 2.1 percent lower than they were at this time last year. However, price levels for other poultry, including turkey, were up in October, increasing 0.3 percent from September to October, but prices are 1.4 percent lower than they were at the same time last year. ERS forecasts poultry prices to decrease 3.0 to 2.0 percent in 2016 but rise between 2.0 and 3.0 percent in 2017.

Egg prices decreased 2 percent from September to October, and prices are 35.5 percent below October 2015 levels. Retail egg prices are among the most volatile retail food prices, as they can be affected by seasonal demand. The upswing in 2015 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 recovers from this outbreak, however, prices at the retail level are expected to decline in 2016. ERS forecasts egg prices to decrease 22.0 to 21.0 percent in 2016 and to decrease an additional 12.0 to 11.0 percent in 2017.

Prices for dairy products increased 0.7 percent in October but remain 1.7 percent lower than they were in October 2015. Retail milk prices have increased month-over-month—up 0.9 percent from September to October—but are down year-over-year—down 1.8 percent since October 2015. These reduced dairy prices have followed global patterns. However, dairy imports have recently 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. This could result in higher dairy prices for the second half of 2016. ERS predicts retail dairy product prices to decrease between 2.5 and 1.5 percent in 2016 but rise between 1.5 and 2.5 percent in 2017.

Fats and oils prices fell 0.2 percent from September to October and are down 1.8 percent since October 2015. While prices for peanut butter rose 0.5 percent from September to October, prices for butter and salad dressings declined. ERS predicts fats and oils prices to change between -0.5 and 0.5 percent in 2016 and to decrease 3.5 to 2.5 percent in 2017.

Prices for fresh fruits rose 1.4 percent from September to October and are 0.6 percent higher than in October 2015. ERS expects fresh fruit prices to increase 2.0 to 3.0 percent in 2016 and 1.0 to 2.0 percent in 2017. Fresh vegetable prices also rose in October, increasing 0.5 percent over September levels; prices are 2.7 percent lower than October 2015. While prices for potatoes and lettuce decreased month to month, tomato prices rose 5.4 percent and other fresh vegetable prices increased 0.3 percent over the same time period. Factors, such as a stronger U.S. dollar and low oil prices, have mitigated the effect of the drought. ERS expects fresh vegetable prices to increase between 0.5 and 1.5 percent in 2016 but to decrease between 3.0 and 2.0 percent in 2017. For more detailed information on the California drought, see California Drought: Food Prices and Consumers.  

In October, prices for cereals and bakery products rose 0.2 percent compared with the previous month, but prices are 1.2 percent lower than they were in October of 2015. While prices for flour and prepared flour mixes decreased 2.5 percent from September to October, prices for rice rose 2.7 percent and bakery product prices rose 0.3 percent. ERS expects the prices for cereals and bakery products to change between -0.5 and 0.5 percent in 2016 and to rise between 0.25 to 1.25 percent in 2017.

See Changes in Food Price Indexes, 2014 through 2017.

Key Month-Over-Month Changes in the Food CPI

Prices for nonalcoholic beverages increased 0.1 percent from September to October but are down 1.3 percent since October 2015. Carbonated beverage prices increased 1.1 percent from September to October, but prices for coffee fell, declining 0.5 percent over the same time period. ERS predicts nonalcoholic beverage prices to change between -0.5 to 0.5 percent in 2016 and 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 decline of 6.2 percent from September to October, prices for processed foods and feeds fell by 1.3 percent, and prices for finished consumer foods dropped 1 percent over the same time period. This is an indication that lower-than-average price increases, or decreases, at the retail level could continue.

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. In October, cattle prices decreased 10.4 percent and are down 25.7 percent since this time last year. However, wholesale beef prices increased in October, rising 1.3 percent on the month, but are down 15.6 percent from the previous year. In 2016, ERS predicts farm-level cattle prices to fall between 21.5 and 20.5 percent and wholesale beef prices to decrease by 18.0 to 17.0 percent. Farm-level cattle prices are expected to decrease an additional 16.0 to 15.0 percent, and wholesale beef prices are expected to decline 11.5 to 10.5 percent in 2017.

Wholesale pork prices fell 4.2 percent from September to October, and prices are 4.5 percent lower than this time last year. Overall, pork production is higher, as litter sizes and hog inventories have recovered. ERS predicts that wholesale pork prices will decrease 2.5 to 1.5 percent in 2016 but increase 1.0 to 2.0 percent in 2017.

Prices for farm-level eggs decreased 25.2 percent from September to October, following a 20.8-percent increase from August to September. Price levels are now 72.5 percent lower than October 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 recovers, ERS forecasts farm-level egg prices to decrease 63.5 to 62.5 percent in 2016 and to decrease an additional 12.0 to 11.0 percent in 2017.

Farm-level soybean prices decreased 2.1 percent from September to October but are 3.3 percent above the October 2015 price level. Wholesale fats and oils prices increased on the month, rising 0.7 percent in October, and are 1.9 percent higher than October 2015 price levels. ERS predicts farm-level soybean prices to rise 2.0 to 3.0 percent in 2016 and 1.0 to 2.0 percent in 2017. Prices for wholesale fats and oils are expected to decrease between 1.0 to 0.0 percent in 2016 and 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 were flat in October and are 0.6 percent higher than in October 2015. Farm-level vegetable prices decreased, falling 5 percent, and prices are 7.9 percent lower than at this time last year. ERS predicts farm-level fruit prices to increase between 8.0 and 9.0 percent in 2016 but to decrease 6.0 to 5.0 percent in 2017. Vegetable prices are also expected to increase in 2016—between 3.5 and 4.5 percent—but to decrease 7.0 to 6.0 percent in 2017. 

See Changes in Producer Price Indexes, 2014 through 2017.