Food Price Outlook, 2020
This page summarizes the December 2020 forecasts, which incorporate the November 2020 Consumer Price Index and Producer Price Index numbers.
See Changes in Food Price Indexes, 2018 through 2021 for data files.
The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, decreased by 0.1 percent from October 2020 to November 2020 before seasonal adjustment, up 1.2 percent from its November 2019 level. The CPI for all food decreased 0.3 percent from October 2020 to November 2020, and food prices were 3.7 percent higher than the November 2019 level.
The amount 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 0.1 percent in November and was 3.8 percent higher than November 2019; and
- The food-at-home (grocery store or supermarket food items) CPI decreased 0.6 percent from October to November 2020 and was 3.6 percent higher than November 2019.
In 2020 thus far, compared to 2019 (reported as "Year-to-date avg. 2019 to avg. 2020"), food-at-home prices have increased 3.5 percent and food-away-from-home prices have increased 3.2 percent. The CPI for all food increased an average of 3.3 percent over this same period. Of the CPI food categories that USDA's Economic Research Service tracks, the category of beef and veal has had the greatest relative price increase (9.8 percent); fresh fruits have had the largest relative price decrease (0.9 percent).
Among retail prices, only the forecast range for eggs was adjusted from November 2020. Soybean and wheat commodity price forecast ranges were adjusted upward as prices have rapidly increased in recent months. In 2020, food-at-home prices are expected to increase between 3.0 and 4.0 percent, and food-away-from-home prices are expected to increase between 2.5 and 3.5 percent. In 2021, food-at-home prices are expected to increase between 1.0 and 2.0 percent, and food-away-from-home prices are expected to increase between 2.0 and 3.0 percent.
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, their rates of growth have diverged. While food-at-home prices deflated in 2016 and 2017, monthly food-away-from-home prices have been rising consistently since then. These differences are partly caused by differences between the cost structure of restaurants and those of supermarkets and grocery stores.
In 2018, retail food-at-home prices rose 0.4 percent. This price increase was the first 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 food categories increased. Eggs had the greatest annual average increase of 10.8 percent in 2018.
In 2019, retail food-at-home prices rose 0.9 percent. This price increase was the second in 4 years, but the rate was still below the 20-year historical annual average of 2.0 percent. While prices for poultry, eggs, fats and oils, and fresh fruits declined in 2019, prices for all other food categories increased. Fresh vegetables had the largest annual average increase of 3.8 percent in 2019, and eggs had the largest annual average decrease of 10.0 percent.
CPI Forecast Changes This Month
Only egg prices were revised downward this month. Forecasts for all categories remained unchanged for 2021.
Retail egg price ranges were revised downward this month. Egg production increases outpaced increases in egg consumption, which led to a decrease in average retail egg prices for November. Retail egg prices are now predicted to increase between 4.0 to 5.0 percent in 2020.
Retail meat prices have been slow to decline following the highs reached at the onset of COVID-19. Some categories of meat have continued to see monthly declines in prices (e.g., beef and veal prices decreased 1.4 percent from August to September, 0.3 percent from September to October, and 0.1 percent from October to November). In contrast, other meat categories have had both decreases and increases in price (e.g., pork prices decreased 1.4 percent from August to September, increased 0.9 percent from September to October, and decreased 1.6 percent from October to November).
Food-away-from-home prices have been steadily increasing since even before the start of the pandemic. They are currently 3.2 percent higher this year, on average, than they were in 2019. The current inflation rate for food-away-from-home is slightly higher than its historical 20-year average rate of inflation (2.8 percent) and the inflation rate in 2019 (3.1 percent).
Producer Price Index (PPI) for Food (not seasonally adjusted)
The Producer Price Index (PPI) is like the CPI in that it measures price changes over time. However, instead of measuring retail price changes, the PPI measures the average change in prices paid to domestic producers for their outputs. The PPI collects data for nearly every industry in the goods-producing sector of the economy. Three major PPI commodity groups are of interest to food markets: 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 various stages of production in the U.S. food supply chain.
The PPIs—measures of changes in farm and wholesale prices—are typically far more volatile than the downstream CPIs. Price volatility decreases as products move from the farm to the wholesale sector to the retail sector. Because of multiple processing stages in the U.S. food system, the CPI typically lags movements in the PPI. The PPI is thus a useful tool for understanding what may soon happen to the CPI.
The USDA Economic Research Service does not forecast industry-level PPIs for unprocessed, processed, and finished foods and feeds. However, these have historically shown a strong correlation with the all-food and food-at-home CPIs.
Prices for farm-level soybeans and farm-level wheat have been revised upward this month. Increased exports, coupled with low stocks of soybeans and wheat, have led to price increases for both commodities. In 2020, farm-level soybean prices are expected to increase between 6.0 and 9.0 percent, and farm-level wheat is expected to increase between 5.0 and 8.0 percent.
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 Economic Research Service Outlook publications including Livestock, Dairy, and Poultry, Oil Crops, Wheat, Fruit and Tree Nuts, and Vegetables and Pulses.
See Changes in Food Price Indexes, 2018 through 2021 for data files.