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) 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
December 2011 Prices (Not Seasonally Adjusted)
The CPI for all food increased 0.2 percent from November to December 2011, increased 0.1 percent from October to November 2011, and is
now 4.7 percent above the December 2010 level. The food-at-home
CPI increased 0.3 percent in December 2011 and is up 6.0 percent
from last December, while the food-away-from-home index was
up 0.2 percent in December 2011 and is 2.9 percent above last
December. Food commodity and energy price increases over the
past year, combined with a weak U.S. dollar, have caused
most of the grocery store price increases observed in 2011.
The all-items CPI was down 0.2 percent in December and is
3.0 percent above the December 2010 level. The 2011 all-food CPI increased more than both the all-items CPI and the fuel CPI, highlighting the fact that many inflationary factors of the past year were strongest for food markets or specific to food markets.
Beef prices were up 0.9 percent in
December and are 11.5 percent above last December,
with steak prices up 11 percent and ground beef prices
up 11.9 percent. Pork prices decreased
1 percent in December and are 8.1 percent
above last December’s level. Poultry
prices increased 1 percent in December and are 4.8 percent
above prices last year at this time, with chicken prices
up 2.9 percent and other poultry prices (including turkey)
up 12.4 percent. Beef and pork
prices are expected to exceed 2011 levels—by 4 to 5 percent for beef and 3 to 4 percent for pork—as cattle and hog inventories are expected to remain low relative to demand. Retail poultry prices are expected to increase 3 to 4 percent in 2012.
Egg prices increased 1.4 percent in
December 2011; egg prices are now
6.4 percent above the December 2010 level. The inventory of table egg-laying hens in the U.S. decreased for much of 2011, and drought conditions throughout the South have reduced output, contributing to the surge in prices in the final quarter of 2011. However, egg prices are expected to stabilize in 2012, increasing 1 to 2 percent over 2011 levels.
Fish and seafood prices were up 0.7
percent from November to December 2011 and are 6.8 percent above
the December 2010 level. Japanese
output is expected to continue recovering throughout 2012, but seafood prices
should remain high in 2012. The current outlook is for an increase in prices of 4 to 5 percent.
Dairy prices were down 0.1 percent from
November to December 2011, compared with a 0.3-percent increase
from October to November 2011. Dairy prices are now 8.1 percent
above the December 2010 level. Within the dairy category,
prices changed as follows in December: milk prices were down 0.1 percent and are 9.2 percent above
last December’s prices; cheese prices
were down 1.0 percent and are 7.8 percent above last December’s
level; ice cream and related product
prices were up 0.7 percent and are 9 percent above last
December's level; and butter prices decreased
0.5 percent this month and are 1.9 percent
below last December. Fluid milk prices are expected to level off early in 2012 and to remain below the average 2010 farm price. The export market for milk will be a significant factor in the coming year, but current expectations are for retail dairy prices
to increase 2 to 3 percent over 2011 levels.
Fresh fruit prices increased 0.6 percent
in December, and the fresh fruit index is down 0.5 percent overall
from last year at this time, with apple prices up 7.1
percent, banana prices up 3.6 percent, citrus fruit prices
down 3.8 percent, and other fresh fruit prices down 3
percent. The fresh vegetable index decreased 0.1 percent in December.
Since last year at this time, fresh vegetable prices are
up 2.4 percent, with potato prices up 7.4 percent, lettuce prices unchanged, tomato prices
up 1.3 percent, and other fresh vegetable
prices up 1.9 percent from this time last year. Fresh fruit prices are expected to increase 3 to 4 percent and fresh vegetable prices 1 to 2 percent in 2012. Processed
fruit and vegetable prices increased 0.6 percent
in December and are 7.0 percent above the December 2010 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. The processed fruit and vegetable index is forecast to increase 3 to 4 percent in 2012.
Cereal and bakery product prices increased 0.2 percent from November to December 2011 and are up 6.1 percent
from last year at this time, with bread prices up 6.7
percent and breakfast cereal prices up 6.5 percent over
the past year. Lower yields for hard red varieties of wheat due to a number of weather-related factors raised wheat prices for 2011. However, these price increases have not been passed on to retail prices to the extent expected, and the cereals and bakery index is expected to increase 3.5 to 4.5 percent in 2012. Sugar and
sweets prices were up 0.4 percent in December and
are 3.8 percent above last December. The 2012 outlook is for an increase of 2 to 3 percent over 2011 levels. Prices for nonalcoholic
beverages, including coffee and carbonated beverages, are down 0.1 percent in December 2011 and are up 5.8 percent from last year. This index is forecast to increase 1.5 to 2.5 percent in 2012.
The index for fats and oils was up 1.2
percent from November to December 2011 and is 13.5 percent above
the December 2010 level. The significant price increases in
2011 were due in large part to surging soybean prices which are expected to stabilize somewhat. The fats and oils index is projected to increase an additional 2.5 to 3.5 percent in 2012.
Background on the CPI for
Food
Although ERS analyzes changes in retail prices
for individual food items, sometimes it is useful
to record and analyze a measure of change for the
overall level of food prices.
The Consumer Price Index (CPI) is the most publicized
and most widely used measure of the general level
of prices in the U.S. economy. The CPI is a composite
measure of the level of average prices paid by urban
consumers for a defined market basket of goods and
services, including food.
The CPI for food at home is a component of the
full CPI and is the principal indicator of changes
in retail food prices. Policymakers, both public
and private, closely follow the CPI for food consumed
at home and its changes, which measure price inflation
for food items. The CPI for food consumed at home
also affects policy evaluation because the effects
of many current and proposed policies are evaluated
based on CPI measures. To contribute to the analysis
of government and commercial decisionmakers, ERS
estimates the future direction of changes in the
CPI for all food, food at home, and food away from
home (see data on the CPI
for food forecasts).
The food price level can be influenced by changes
in costs incurred by food system firms. Changes
in input costs can translate directly into changes
in the CPI or may have little or no effect. Researchers
at ERS not only produce forecasts of the CPI but
also analyze the impact of economic factors on changes
in the CPI, including changes in firms' costs. |
|
