Summary Findings

Food Price Outlook, 2018-19

This page provides the following information for August 2018:

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

The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, was up 0.1 percent from July to August 2018 and is 2.7 percent above the August 2017 level. The CPI for all food rose 0.1 percent from July to August, and food prices were 1.4 percent higher than the August 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 rose 0.2 percent in August and is 2.6 percent higher than August 2017; and
  • The food-at-home (grocery store or supermarket food items) CPI was also up this month, rising 0.1 percent from July to August, and is 0.5 percent higher than last August.

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 2018, retail food prices are expected to rise between 0.0 to 1.0 percent, which is still below the 20-year historical average of 2.1 percent. While fats and oils, pork, nonalcoholic beverages, dairy, and processed fruits and vegetables could potentially decline in price, prices for beef and veal, poultry, fish and seafood, eggs, and fresh fruits and vegetables are expected to increase. Due to deflation in 2016 and 2017, expected price increases would still leave overall price levels in 2018 lower than in 2015. 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.

Looking ahead to 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 may continue to see lower prices, including pork, other meats, fats and oils, processed fruits and vegetables, and nonalcoholic beverages. Beef and veal, poultry, fish and seafood, fresh vegetables, sugars and sweets, and other foods are all expected to increase but at rates lower than their 20-year historical averages. Food-away-from-home is expected to continue its consistent rate of growth 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 decreased 0.1 percent from July to August but are 0.8 percent higher than this time last year. Beef production is expected to expand in 2018 due to slightly higher expected carcass weights, combined with more cattle being put on the market and greater expected slaughter. Although cattle prices were stronger than previously expected in late 2017, prices throughout the cattle and beef complex in 2018 are likely to remain below 2017 levels. Lower prices at earlier stages of production are likely to place downward pressure on retail beef and veal prices. ERS expects retail prices for beef and veal to increase 1.0 to 2.0 percent in 2018 and rise 1.5 to 2.5 percent in 2019.

Egg prices decreased 0.1 percent from July  to August but are 14.7 percent above August 2017 levels. Retail egg prices are among the most volatile retail food prices, as they can be affected by seasonal demand. In 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 are expected to increase 9.0 to 10.0 percent in 2018 and an additional 2.0 to 3.0 percent in 2019.

Fats and oils prices decreased 0.3 percent from July to August and are 0.1 percent lower than in August 2017. While prices for salad dressing rose 0.8 percent from July to August, butter and margarine prices fell 0.7 percent, and prices for other fats and oils, including peanut butter, decreased 0.6 percent in August. ERS expects prices for fats and oils to change between -0.75 and 0.25 percent in 2018 and fall an additional 3.0 to 2.0 percent in 2019.

Other foods, the largest consumer food spending category, fell 0.3 percent from July to August, but this category is 0.4 percent higher than the same time last year. Prices for soup decreased 0.6 percent, prices for frozen and freeze-dried prepared foods were down 0.3 percent, and prices for snacks decreased 0.3 percent from July to August. ERS predicts other food prices to change between -0.25 to 0.75 percent in 2018 and rise 0.0 to 1.0 percent in 2019.

See Changes in Food Price Indexes, 2016 through 2019.

Key Month-Over-Month Changes in the Food CPI

In August, pork prices rose 1.2 percent from the previous month, but prices are 1.4 percent lower than in August 2017. Lower beef prices are most likely adding pressure to lower pork prices as consumers make meat substitutions. In 2018, pork production is expected to continue expanding as more pork processing facilities come on line. As a result, ERS expects pork prices to change between -1.0 and 0.0 percent in 2018 and change between -0.75 and 0.25 percent in 2019.

Prices for poultry fell 1.0 percent from July to August but remain unchanged from this time last year. While prices may increase at the retail level, price increases are still expected to be lower than the 20-year historical average of 2.0 percent. Lower projected feed costs and higher poultry production forecasts could place downward pressure on retail price inflation. Retail poultry prices are expected to increase an additional 0.5 to 1.5 percent in 2018 and 1.0 to 2.0 percent in 2019.

Dairy product prices increased 0.4 percent from July to August but are unchanged from August 2017 prices. Retail milk prices rose 0.9 percent, and ice cream and related product prices increased 1.5 percent from July to August. However, cheese and related product prices fell 0.4 percent over the same time period. Milk production is expected to rise at a modest rate of 1.1 percent in 2018. Dairy exports have strengthened but are expected to be limited for the rest of the year due to recent tariffs imposed by Mexico and China. Domestic demand for most dairy products has been relatively weak in the first half of the year but is expected to recover in the second half of 2018. ERS expects retail dairy prices to decrease between 1.0 to 0.0 percent in 2018 but rise 3.0 to 4.0 percent in 2019.

Prices for fresh fruits fell 0.6 percent from July to August but are up 1.3 percent compared with August 2017. Despite rising prices for apples and citrus fruits, banana prices were 1.0 percent lower, and other fresh fruit prices were down 4.1 percent from July to August. ERS expects fresh fruit prices to increase 1.5 to 2.5 percent in 2018 and 2.0 to 3.0 percent in 2019. 

Fresh vegetable prices increased from July to August, rising 0.1 percent, and are 1.0 percent higher than in August 2017. Prices for vegetables, except for tomatoes, were up—retail potato prices rose 0.1 percent, retail lettuce prices were up 1.8 percent, and other fresh vegetable prices were up 0.1 percent from July to August. Fresh vegetable prices are expected to increase 0.0 to 1.0 percent in 2018 and increase an additional 2.0 to 3.0 percent in 2019.

In August, prices for cereals and bakery products were flat compared with the previous month but were 0.3 percent higher than August 2017. While prices for flour fell, prices for pasta, rice, and cornmeal rose 0.3 percent, prices for breakfast cereal rose 0.7 percent, and bread prices rose 0.4 percent from July to August. ERS expects prices for cereals and bakery products to increase 0.25 to 1.25 percent in 2018 and increase an additional 2.5 to 3.5 percent in 2019. 

Prices for nonalcoholic beverages rose 0.4 percent from July to August and are 0.2 percent higher than August 2017. Carbonated beverage prices increased 2.1 percent from July to August, and prices for coffee rose 0.1 percent over the same period. Overall price increases for this category can be mainly attributed to frozen and non-frozen juices. Nonalcoholic beverage prices are expected to change between -0.5 to 0.5 percent in 2018 and change between -0.25 to 0.75 percent in 2019.

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. Prices for unprocessed foods and feeds fell 8.6 percent, prices for processed foods and feeds decreased 0.5 percent, and prices for finished consumer foods were down 0.6 percent from July to August. Price changes at these earlier stages of production could be indicative of future trends at the retail level. Therefore, a trend of lower than average inflation (or deflation) for many foods at the retail level could be expected in the coming months.

In August, cattle prices decreased 2.3 percent and are down 1.8 percent since this time last year. Wholesale beef prices also decreased in August, falling 2.1 percent, and are down 4.3 percent from the previous year. Farm-level cattle prices are expected to decrease 3.0 to 2.0 percent in 2018 but could increase 0.0 and 1.0 percent in 2019. Wholesale beef prices are expected to decrease 1.0 to 0.0 percent in 2018 and decrease an additional 3.0 to 2.0 percent in 2019.

Wholesale pork prices fell 3.3 percent from July to August and are 14.4 percent lower than this time last year. Wholesale pork prices are expected to decrease 7.0 to 6.0 percent in 2018 and decrease 1.0 to 0.0 percent in 2019.

Prices for farm-level eggs decreased 10.8 percent from July to August. However, price levels are still 45.6 percent higher than August 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 are expected to increase 30.0 to 31.0 percent in 2018 and increase an additional 1.0 to 2.0 percent in 2019.

Prices for farm-level milk decreased 7.0 percent from July to August, and prices are 19.0 percent lower than they were in August 2017. Wholesale dairy prices on the other hand, were unchanged from July to August but remain 3.7 percent lower than they were this time last year. Farm milk prices are expected to decrease 9.0 to 8.0 percent in 2018 but increase 1.0 to 2.0 percent in 2019. Wholesale dairy prices are forecast to decrease 3.0 to 2.0 percent in 2018 and fall an additional 1.0 to 0.0 percent in 2019.

Farm-level soybean prices decreased 0.1 percent from July to August and are 6.9 percent lower than the August 2017 price level. Wholesale fats and oils prices also decreased on the month, falling 0.8 percent in August, and are 3.8 percent lower than August 2017 price levels. Farm-level soybean prices are expected to decrease 3.5 to 2.5 percent in 2018 and decrease an additional 3.0 to 2.0 percent in 2019. Prices for wholesale fats and oils are expected to decrease 1.0 to 0.0 percent in 2018 and decline an additional 3.0 to 2.0 percent in 2019.

Farm-level fruit prices declined 12.2 percent in August but are 0.1 percent higher than in August 2017. On the other hand, farm-level vegetable prices increased in August, rising 12.4 percent, but prices are 1.5 percent lower than they were this time last year. Farm-level fruit prices are expected to decrease 3.0 to 2.0 percent in 2018 and decline an additional 4.0 to 3.0 percent in 2019. Farm-level vegetable prices are expected to decrease 7.0 to 6.0 percent in 2018 and decrease an additional 3.5 to 2.5 percent in 2019.

Farm-level wheat prices rose 6.6 percent from July to August and are 18.0 percent higher than they were in August 2017. Prices for wholesale wheat flour increased, rising 1.7 percent from July to August, but prices were 0.7 percent lower than in August 2017. Farm-level wheat prices are expected to rise 16.0 to 17.0 percent in 2018 and increase an additional 5.0 to 6.0 percent in 2019. On the other hand, wholesale wheat flour prices are expected to change between -0.5 to 0.5 percent in 2018 and decline an additional 4.0 to 3.0 percent in 2019. 

See Changes in Producer Price Indexes, 2016 through 2019.