Food Price Outlook, 2015
This page provides the following information for April 2015:
Consumer Price Index (CPI) for Food (not seasonally adjusted)
The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, rose 0.2 percent from March to April but remains 0.2 percent below the April 2014 level. In contrast, the CPI for all food was flat from March to April and is now 2 percent above the April 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 April and is up 2.9 percent year-over-year; and
- The food-at-home (grocery store or supermarket food items) CPI was down 0.1 percent in April but is 1.3 percent higher than last April.
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 normal to slightly-lower-than-average food price inflation, increasing 2.0 to 3.0 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.
Beef and veal prices continued to rise, increasing 0.4 percent from March to April and 10.2 percent year-over-year. Prices remain high, as the U.S. cattle inventory recovers from historically low levels. While recent rains in the Southern Plains and Southwest have improved pasture conditions in the short term, the drought still continues throughout these regions. 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 now predicts beef and veal prices will increase 5.5 to 6.5 percent in 2015.
Pork prices fell again in April, decreasing 2.8 percent from the previous month and 3.7 percent from last year. Retail pork inflation in 2014 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 1.0 to 0.0 percent in 2015.
Prices for fats and oils fell 0.2 percent from March to April and are 0.5 percent lower than last April. 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 now predicts fats and oils prices to increase -0.5 to 0.5 percent in 2015.
See Changes in Food Price Indexes, 2013 through 2015 Excel icon (16x16) .
Key Month-Over-Month Changes in the Food CPI
Prices for poultry were flat from March to April and are 3.1 percent higher year-over-year. Partly due to an increase in production, retail poultry price inflation has remained close to the 20-year historical average of 2.6 percent. In addition, poultry exports have declined as countries ban or partially ban U.S. products due to the recent Highly Pathogenic Avian Influenza (HPAI) outbreak. 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.
Egg prices continued to decrease, falling 2.5 percent from March to April but are 2.2 percent above April 2014 levels. Retail egg prices are among the most volatile retail food prices, as they can be affected by seasonal demand. There is also concern that egg prices may increase as table-egg-laying flocks are affected by the HPAI illness. However, lower feed costs and favorable conditions for industry expansion could have a mitigating effect on any price inflation resulting from the outbreak. ERS expects egg prices to increase 2.5 to 3.5 percent in 2015.
Fresh fruit prices rose 1.3 percent from March to April but are down 5.4 percent since April 2014. The increase in fresh fruit prices was partially driven by a 3.4-percent increase in the price for citrus fruits from March to April. Fresh fruit prices are lower 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 April, falling 1.4 percent over March levels; prices are up 1.8 percent since April 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 0.9 percent from March to April. However, prices for intermediate foods and feeds fell in April, declining 0.8 percent. Prices for finished consumer foods also deflated in April, falling by 0.3 percent month-over-month. The recent price declines for commodities and foods at earlier stages of the food supply chain suggest that food prices at the retail level could continue to face downward 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 April, cattle prices increased 0.6 percent and are up 11.7 percent since this time last year. Wholesale beef prices also rose, increasing 2.1 percent on the month, and are now up 13.1 percent year-over-year. Wholesale beef prices are expected to remain historically high through the remainder of 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 in 2015. As pasture and water conditions continue to improve 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 continued to fall, decreasing 6.7 percent from March to April; prices are down 35.1 percent since this time last year. Wholesale pork prices are down because 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 now 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 fell 26.7 percent from March to April; prices are also down 29.9 percent from April 2014 levels. Egg prices are among the most volatile prices; they typically peak in the fourth quarter of the year and then fall in the first quarter of the new year. ERS now forecasts farm-level egg prices to decrease 5.0 to 4.0 percent in 2015.
Farm-level soybean prices fell 1.4 percent from March to April and are now 36.2 percent below the April 2014 level. Wholesale fats and oils prices also decreased, falling 0.8 percent in April, and prices are 8 percent lower than April 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 3.2 percent from March to April and are 24.5 percent lower than prices in April 2014. Wholesale wheat flour prices fell, decreasing 1.3 percent month-over-month, and prices have fallen 8.4 percent since April 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 April. Farm-level fruit prices increased 0.5 percent in April, while farm-level vegetable prices rose 3.8 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 Excel icon (16x16) .