Food Price Outlook, 2015
This page provides the following information for February 2015:
Consumer Price Index (CPI) for Food (not seasonally adjusted)
The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, rose 0.4 percent from January to February and is unchanged from the February 2014 level. The CPI for all food increased 0.1 percent from January to February and is now 3.0 percent above the February 2014 level.
- The food-away-from-home (restaurant purchases) CPI increased 0.3 percent in February and is up 3.1 percent year-over-year; and
- The food-at-home (grocery store or supermarket food items) CPI was down 0.1 percent in February and is 2.9 percent higher than last February.
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. 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 6- to 18-month production process. Additionally, the effects of Porcine Epidemic Diarrhea virus (PEDv) on the hog industry will be transmitted to meat prices in the immediate future. 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 February, decreasing 1.1 percent from the previous month. However, pork prices are still 5.9 percent higher than last year. Retail pork inflation was largely due to the effects of PEDv, which had reduced the autumn number of hogs ready for production. However, there are some signs of industry expansion as the effects of PEDv are subsiding; hog prices in 2015 are expected to fall below 2014 figures. ERS now predicts pork prices to rise 0.0 to 1.0 percent in 2015. As a result of lower pork prices, the forecast for meats was also adjusted downward and is now expected to increase 3.0 to 4.0 percent in 2015.
See Changes in Food Price Indexes, 2013 through 2015 Excel icon (16x16) .
Key Month-Over-Month Changes in the Food CPI
Beef and veal prices continued to rise, increasing 0.7 percent from January to February and 15.2 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 somewhat, 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. Many producers are holding on to their inventory to increase live weights, as steer and heifer prices have hit record highs. Most retail beef prices, on average, are also at record highs, even after adjusting for inflation. ERS predicts beef and veal prices will increase 5.0 to 6.0 percent in 2015.
Prices for poultry rose 0.1 percent from January to February and are 2.6 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. 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 increased 0.9 percent from January to February and are 8.5 percent above February 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 the new law affecting eggs sold in California (Proposition 2) will affect retail egg prices across the country. While this may cause higher prices in California, prices elsewhere may face downward pressure if out-of-State egg producers choose not to alter their facilities and look elsewhere within the U.S. to sell their eggs. ERS expects egg prices to increase 2.5 to 3.5 percent in 2015.
The prices for dairy products decreased 1 percent from January to February and are 2.1 percent above February 2014 prices. With lower feed prices supporting dairy herd expansion, 2015 prices are expected to fall at the farm and wholesale level, placing downward pressure on retail dairy prices. However, strong demand and lower milk output per cow could have a mitigating effect. ERS predicts dairy prices to increase 2.0 to 3.0 percent in 2015.
Prices for fats and oils fell 0.4 percent from January to February but are 0.4 percent higher than last February. The relatively low level of price inflation for fats and oils is primarily due to record-level oilseed production. ERS predicts fats and oils prices to increase 0.0 to 1.0 percent in 2015.
Fresh fruit prices fell 0.7 percent from January to February and are up 0.2 percent since February 2014. The decrease in fresh fruit prices was partially driven by a 0.9-percent drop in the price for fresh oranges and tangerines from January to February. Citrus prices are currently lower throughout the U.S. since it is peak season for citrus. ERS expects prices for fresh fruit to increase 2.5 to 3.5 percent in 2015. Despite higher lettuce prices, fresh vegetable prices decreased in February, falling 2.6 percent over January levels; prices are up 2.3 percent since February 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 decrease of 5.5 percent from January to February. Inflation for intermediate foods and feeds also fell in February, declining 1.7 percent. Inflation for finished consumer foods declined by 1.5 percent over the same time period. 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 come down 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. In February, cattle prices decreased 1.2 percent but are up 15.1 percent since this time last year. Wholesale beef prices also decreased, falling 3.3 percent on the month, and are now up 19.1 percent year-over-year. ERS predicts farm-level cattle prices to increase in 2015 by 4.5 to 5.5 percent and wholesale beef prices to increase by 5.0 to 6.0 percent over the same time period. 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 6.5 percent from January to February; prices are down 8.3 percent since this time last year. Wholesale pork prices are down because the hogs being slaughtered are heavier and the number of 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 5.0 to 4.0 percent in 2015, as the effects of PEDv are subsiding.
After decreasing 40.4 percent the previous month, the price for farm-level eggs rose 24.3 percent from January to February; prices are up 8.4 percent from February 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 increase 0.0 to 1.0 percent in 2015.
Farm-level soybean prices have declined in recent months, decreasing 3 percent from January to February. Soybean prices are now 28 percent below the February 2014 level. Record-high soybean production has contributed to lower prices. Wholesale fats and oils prices were flat in February and are 5.5 percent lower than February 2014 levels. ERS predicts farm-level soybean prices to fall 9.0 to 8.0 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 2.7 percent from January to February and are 12.5 percent lower than prices in February 2014. Wholesale wheat flour prices have also fallen, decreasing 0.5 percent month-over-month and 6.1 percent since February 2014. ERS now predicts farm-level wheat prices to fall 5.0 to 4.0 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. However, prices for both farm-level fruit and vegetables fell in February. Farm-level fruit prices dropped 3.2 percent in February, while farm-level vegetable prices fell 17.1 percent month-over-month. 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) .