Food CPI and Expenditures: Analysis and Forecasts of the CPI for Food

Overview Background Analysis and Forecasts of the CPI for Food What's Behind the Forecasts? How Changes in Input Costs Affect Food Prices CPI Bias Three Types of Food Expenditures Series Measuring the ERS Food Expenditure Series Recommended Data Recommended Readings Related Links

On the Accuracy of Nielsen Homescan Data

Food Price Outlook, 2012

Food prices surged in the final quarter of 2011, resulting in annual price inflation slightly above ERS's expectations for beef and veal, eggs, and fats and oils. The food-at-home Consumer Price Index (CPI), in turn, increased more than expected—4.8 percent in 2011—which means that food price inflation was not as strong as in 2008 when it increased 6.4 percent over 2007. With inflationary pressures not expected to intensify in 2012, this higher starting point for food prices translates into a moderated outlook for inflation in 2012.

The CPI for all food is projected to increase 2.5 to 3.5 percent in 2012, with food-at-home (grocery store) prices also forecast to increase 2.5 to 3.5 percent and food-away-from-home (restaurant) prices forecast to increase 2 to 3 percent. The average annual increase for food-at-home prices between 1990 and 2011 was 2.8 percent, and ERS's current outlook for 2012 falls within the historical average for food price inflation. All ERS forecasts for 2012 assume normal weather conditions and no shocks to the global market for major commodities.

See ERS data on CPI for food and CPI forecasts

March 2012 Prices (Not Seasonally Adjusted)

The CPI for all food increased 0.1 percent from February to March, decreased 0.1 percent from January to February, and is now 3.3 percent above the March 2011 level. The food-at-home CPI increased 0.1 percent in March and is up 3.6 percent from last March, while the food-away-from-home index was up 0.2 percent in March and is 3.0 percent above last March. The all-items CPI was up 0.8 percent in March and is 2.7 percent above the March 2011 level. The March 2012 food-at-home CPI posted its smallest year-over-year increase since April 2011, an indication that food price inflation has slowed down.

Beef prices were up 0.8 percent in March and are 6.8 percent above last March, with steak prices up 7.3 percent and ground beef prices up 6.7 percent. Pork prices increased 0.7 percent in March and are 3.4 percent above last March’s level. Poultry prices increased 1.4 percent in March and are 6.5 percent above prices last year at this time, with chicken prices up 5.3 percent and other poultry prices (including turkey) up 11.2 percent.

Egg prices increased 0.5 percent in March; egg prices are now 5.1 percent above the March 2011 level. Egg price inflation is returning to historically average levels, as the domestic inventory of egg-laying hens in the U.S. continues to increase.

Fish and seafood prices were up 0.6 percent from February to March and are 3.9 percent above the March 2011 level. Japanese output is expected to continue recovering throughout 2012, but seafood prices should remain high in 2012.  

Dairy prices were down 0.1 percent from February to March, compared with a 0.5-percent decrease from January to February. Dairy prices are now 6.3 percent above the March 2011 level. Within the dairy category, prices changed as follows in March: milk prices were down 0.4 percent and are 4 percent above last March’s prices; cheese prices were down 0.2 percent and are 8.7 percent above last March’s level; ice cream and related product prices were up 0.5 percent and are 6.4 percent above last March's level; and butter prices decreased 3.5 percent this month and are 8.5 percent below last March. Fluid milk prices are expected to level off early in 2012 and to remain below the average 2011 farm price; this should restrict overall dairy retail price inflation for the year.

Fresh fruit prices decreased 0.4 percent in March, and the fresh fruit index is up 0.1 percent overall from last year at this time, with apple prices up 3.3 percent, banana prices down 0.4 percent, citrus fruit prices down 5.4 percent, and other fresh fruit prices up 1.2 percent. The fresh vegetable index decreased 1.1 percent in March. Since last year at this time, fresh vegetable prices are down 12.6 percent, with potato prices up 1 percent, lettuce prices down 20.5 percent, tomato prices down 28.8 percent, and other fresh vegetable prices down 7.9 percent from this time last year. Unseasonably warm weather and favorable growing conditions in the first quarter of 2012 have resulted in prices and output for many vegetable crops that contrast sharply with prices and output for this time last year. Processed fruit and vegetable prices decreased 0.6 percent in March and are 5.5 percent above the March 2011 level. The contracts within the processed fruit and vegetable industry have kept price inflation below that for fresh fruits and vegetables throughout 2011, but 2012 prices are expected to reflect increased fuel and commodity costs.

Cereal and bakery product prices decreased 0.3 percent from February to March and are up 4.5 percent from last year at this time, with bread prices up 5.6 percent and breakfast cereal prices up 3.6 percent over the past year. Sugar and sweets prices were up 0.5 percent in March and are 4.6 percent above last March. Prices for nonalcoholic beverages, including coffee and carbonated beverages, are down 0.1 percent in March and are up 2.7 percent from last year.

The index for fats and oils was up 0.1 percent from February to March and is 8.9 percent above the March 2011 level. The significant price increases in 2011 were due in large part to surging soybean prices. Soybean production in South America is expected to decrease considerably in 2012 which may apply more pressure on U.S. exports.