Food Price Outlook, 2015
This page provides the following information for May 2015:
Consumer Price Index (CPI) for Food (not seasonally adjusted)
The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, rose 0.5 percent from April to May but remains flat compared with the May 2014 level. In contrast, the CPI for all food was flat from April to May and is now 1.6 percent above the May 2014 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 increased 0.2 percent in May and is up 3.0 percent year-over-year; and
- The food-at-home (grocery store or supermarket food items) CPI was down 0.1 percent in May but is 0.6 percent higher than last May.
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. Despite the effects of the 2014 drought in the Southwest and California, retail food price inflation rates approached the 20-year historical average of 2.6 percent per year. In 2014, the food-at-home CPI increased 2.4 percent. The most notable annual inflation increases were seen in the perimeter of the grocery store—retail beef and veal, pork, eggs, fish and seafood, dairy, and fresh fruit experienced above-average price increases. Alternatively, items in the center aisles of grocery stores experienced below-average inflation or, in some instances, even deflation. In 2014, prices fell for fresh vegetables, sugars and sweets, and nonalcoholic beverages. While overall food price inflation was close to its 20-year historical average, inflation across food categories covered a broad spectrum.
Looking ahead to 2015, ERS predicts that supermarket (food-at-home) prices will see slightly-lower-than-average food price inflation, increasing 1.75 to 2.75 percent. However, food price inflation is expected to vary by category. Beef and veal prices will likely continue to experience the effects of the Texas/Oklahoma drought, as farmers' decisions on calving and herd sizes are felt down the line due to the 16- to 18-month production process. Additionally, the effects of Porcine Epidemic Diarrhea virus (PEDv) on the hog industry are subsiding, and the hog industry has started to expand in 2015. This forecast is based on an assumption of normal weather conditions; however, severe weather events could potentially drive up food prices beyond the current forecasts. In particular, the ongoing drought in California could have large and lasting effects on fruit, vegetable, dairy, and egg prices. Conversely, if oil prices continue to fall or remain low throughout 2015, subsequent decreases in production and transportation costs may be passed on to the retail level.
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.
Pork prices fell again in May, decreasing an additional 0.1 percent from the previous month and 6.8 percent from last year. In 2014, retail pork inflation was largely due to the effects of PEDv, which had reduced the autumn number of hogs ready for production. In 2015, however, hog prices are expected to fall below 2014 figures, as there are signs of industry expansion and a lower volume of pork exports due to the strength of the U.S. dollar. ERS now predicts pork prices to fall 4.0 to 3.0 percent in 2015. As a result of lower expected prices for retail pork, inflation forecasts for meats, poultry, and fish and meats have also been adjusted downwards—ERS now predicts both categories to increase 2.5 to 3.5 percent in 2015.
Egg prices continued to decrease, falling 1.4 percent from April to May, but are 3.1 percent above May 2014 levels. Retail egg prices are among the most volatile retail food prices, as they can be affected by seasonal demand. The recent Highly Pathogenic Avian Influenza (HPAI) outbreak has caused concern that egg prices may increase as table-egg-laying flocks in the Midwest and Pacific Northwest are affected by the illness. On the other hand, lower feed costs have had a mitigating effect on price inflation in the first part of 2015. Based on May's higher prices at the farm-level, ERS expects to see rising retail prices in the coming months. ERS now forecasts egg prices to increase 3.0 to 4.0 percent in 2015.
In May, prices for dairy products fell 0.7 percent from the previous month and are now 2 percent lower than they were in May 2014. Retail dairy prices have been falling in 2015, as the dairy market has seen strong production and lower feed prices. ERS now predicts dairy product prices to increase 1.5 to 2.5 percent in 2015.
See Changes in Food Price Indexes, 2013 through 2015 .
Key Month-Over-Month Changes in the Food CPI
Beef and veal prices fell for the first time since January 2014, decreasing 0.1 percent from April to May, but are still up 10.1 percent year-over-year. Overall, prices remain high as the U.S. cattle inventory recovers from historically low levels. Recent rains in the Southern Plains and Southwest have improved pasture conditions in the short term. In addition, lower feed prices allow cattle producers to feed cattle longer and to hold cattle for herd expansion. Most retail beef prices, on average, are at record highs, even after adjusting for inflation. ERS predicts beef and veal prices will increase 5.5 to 6.5 percent in 2015.
Prices for poultry fell by 1.7 percent from April to May and are 0.1 percent higher year-over-year. Partly due to an increase in broiler production, retail poultry price inflation has remained relatively low in 2015. However, looking at inflation separately for chicken and other poultry, including turkey, ERS found that lower prices for chicken are driving overall poultry inflation downward. Chicken prices fell by 2.4 percent from April to May, while prices for other poultry, including turkey, increased 1.1 percent over the same time period. The recent outbreak of HPAI has affected turkey flocks, particularly in Minnesota. As countries institute bans or partial bans on U.S. poultry exports, the result is that more chicken broilers are left on the U.S. market, placing downward pressure on retail chicken prices. ERS predicts poultry price inflation to continue near the historical average in 2015 and forecasts poultry prices to increase 2.5 to 3.5 percent in 2015.
Prices for fats and oils increased 0.1 percent from April to May but are 1 percent lower than last May. The relatively low level of price inflation for fats and oils is primarily due to record-level oilseed production as well as increased import volume. ERS predicts fats and oils prices to increase -0.5 to 0.5 percent in 2015.
Fresh fruit prices rose 1.7 percent from April to May but are down 5.7 percent since May 2014. Fresh fruit prices are lower year-over-year due, in part, to the supply and price of imports. ERS expects prices for fresh fruit to increase 2.5 to 3.5 percent in 2015. Fresh vegetable prices decreased again in May, falling 0.2 percent over April levels; prices are up 1 percent since May 2014. Fresh vegetable prices are expected to increase 2.0 to 3.0 percent in 2015.
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—crude foodstuffs and feedstuffs, 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 stage-of-processing 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 crude, intermediate, and finished foods and feeds, but these have historically shown a strong correlation with the all-food and food-at-home CPIs. Crude foods and feeds posted a monthly increase of 2.1 percent from April to May. Prices for intermediate foods and feeds also rose in May, increasing 0.5 percent. Prices for finished consumer foods increased in May by 0.7 percent month-over-month. The recent price increases for commodities and foods at earlier stages of the food supply chain suggest that food prices at the retail level could continue to face upward pressure in the coming months.
Inflation rates for farm-level cattle and wholesale beef prices were high in 2014, as U.S. cattle herd sizes were at historically low levels. While inflationary pressures have lessened, farm-level cattle and wholesale beef price inflation remains elevated in 2015. In May, cattle prices decreased 0.6 percent but are up 11.5 percent since this time last year. Wholesale beef prices rose, increasing 0.8 percent on the month and are now up 12.3 percent year-over-year. In 2015, ERS predicts farm-level cattle prices to rise 5.0 to 6.0 percent and wholesale beef prices to increase by 6.0 to 7.0 percent. As pasture and water conditions continue to improve in cattle-producing regions in the western half of the United States and feed prices remain low, more cattle have been reported on pasture lots. However, increases in beef production require time, as it takes roughly 16 to 18 months from birth until cattle are ready for market.
Wholesale pork prices increased 2.9 percent from April to May; prices are down 30 percent since this time last year. Wholesale pork prices are down overall, as the effects of PEDv are subsiding. In addition, the hogs being slaughtered are heavier and exports are lower. Exports have fallen as the U.S. dollar strengthens and foreign markets look elsewhere for their pork. ERS predicts that wholesale pork prices will decrease 15.0 to 14.0 percent in 2015, as the effects of PEDv are subsiding.
Prices for farm-level eggs increased 35.4 percent from April to May; prices are now up 9.2 percent from May 2014 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. Prices are also affected by HPAI, which has reduced the count of table-egg laying birds in many Midwestern and Pacific Northwestern States. ERS now forecasts farm-level egg prices to increase 8.0 to 9.0 percent in 2015.
Farm-level soybean prices fell 2.9 percent from April to May and are now 37.4 percent below the May 2014 level. However, wholesale fats and oils prices increased on the month, rising 0.5 percent in May, and prices are now 7.7 percent lower than May 2014 levels. ERS predicts farm-level soybean prices to fall 14.0 to 13.0 percent in 2015. Prices for wholesale fats and oils are expected to decrease 1.0 to 0.0 percent in 2015.
Like soybeans, wheat production has been high in 2014 and 2015. As a result, farm-level wheat prices fell an additional 4.6 percent from April to May and are 30.3 percent lower than prices in May 2014. Wholesale wheat flour prices rose, increasing 1 percent month-over-month, but prices have fallen 9.5 percent since May 2014. ERS predicts farm-level wheat prices to fall 10.0 to 9.0 percent in 2015 and wholesale wheat flour prices to decrease 3.0 to 2.0 percent.
The ongoing drought in California has raised concerns about rising produce prices at supermarkets or grocery stores. Prices for both farm-level fruit and vegetables rose in May. Farm-level fruit prices increased 3.9 percent in May, while farm-level vegetable prices rose 5.7 percent month-over-month—an indication that retail produce prices could increase in the coming months. ERS predicts both farm-level fruit and vegetable prices to increase 0.0 to 1.0 percent in 2015.
See Changes in Producer Price Indexes, 2013 through 2015 .