Summary Findings

Food Price Outlook, 2017

This page provides the following information for January 2017:

Consumer Price Index (CPI) for Food (not seasonally adjusted)

The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, was up 0.6 percent from December 2016 to January 2017 and is 2.5 percent above the January 2016 level. The all-items CPI is up since January 2016, as prices increased for many goods and services, housing costs went up 3.1 percent, transportation costs rose 4.8 percent, and medical care costs increased 3.9 percent. The CPI for all food rose 0.4 percent from December to January, but food prices declined 0.2 percent compared with the January 2016 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 was up 0.4 percent in January and is 2.4 percent higher than January 2016; and
  • The food-at-home (grocery store or supermarket food items) CPI also rose 0.4 percent from December to January but is still 1.9 percent lower than last January. This marks the first time that food-at-home prices have increased on the month since April 2016.

Food-at-home prices declined overall in 2016, falling 1.3 percent below 2015 levels. This marks the first annual decline in supermarket prices since 1967. Looking at specific retail food categories, prices declined 21.1 percent for eggs, 6.3 percent for beef and veal, 4.1 percent for pork, and 2.3 percent for dairy and related products. However, not all foods declined in price—fresh fruit prices rose 2.2 percent and other foods rose 0.3 percent compared with 2015 prices.

The overall decline in retail food prices was due to several factors: increased production for many commodities, lower transportation costs as a result of deflated oil prices, and a strong U.S. dollar. A strong dollar affects domestic prices as it makes U.S. goods less desirable to foreign markets, leaving more potential exports on the domestic market.

While food-at-home prices declined in 2016, prices for food away from home increased 2.6 percent. Restaurant prices have been rising consistently month-over-month due, in part, to differences in the cost structure of restaurants versus supermarkets or grocery stores. Restaurant prices primarily comprise labor and rental costs with only a small portion going toward food. For this reason, decreasing farm-level and wholesale food prices have had less of an impact on restaurant menu prices.

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.

Looking ahead to 2017, supermarket prices are expected to rise between 0.0 and 1.0 percent. Despite declining prices in 2016, poultry, fish and seafood, and dairy prices are expected to rise in 2017. These forecasts are based on an assumption of normal weather conditions throughout the remainder of the year; however, severe weather or other unforeseen events could potentially drive up food prices beyond the current forecasts. In particular, drought conditions throughout the U.S. could have large and lasting effects on fruit, vegetable, dairy, and egg prices. Also, a stronger U.S. dollar could continue to make the sale of domestic food products overseas more difficult. This would increase the supply of foods on the domestic market, placing downward pressure on retail food prices.

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.

Prices for poultry rose 0.2 percent from December to January but are 1.2 percent lower than last year. Retail chicken price inflation has remained relatively low in 2016 partly due to an increase in broiler production. Furthermore, a strong U.S. dollar contributed to more chicken broilers remaining in the U.S. market which, in turn, places downward pressure on retail chicken prices. Poultry prices declined 2.7 percent in 2016. However, as the industry recovers from lower 2016 retail prices, ERS predicts prices to rise between 1.5 and 2.5 percent in 2017.

Prices for dairy products increased 0.9 percent in January but remain 0.5 percent lower than they were in January 2016. Retail milk prices have decreased month-over-month—down 0.5 percent from December to January. Retail milk prices are also down year-over-year—declining 0.7 percent since January 2016. Despite retail milk prices declining in January, prices for cheese rose 1.7 percent and ice cream product prices were up 0.5 percent since December. Retail dairy prices declined 2.3 percent in 2016. These reduced dairy prices have followed global patterns. However, dairy imports have declined from very high levels in the first quarter of 2016, domestic demand for dairy is expected to be high, and exports are expected to strengthen for products with high skim-milk content (such as nonfat dry milk and whey products). ERS expects retail dairy product prices to rise between 2.0 and 3.0 percent in 2017.

Fats and oils prices rose 0.7 percent from December to January but are down 1.7 percent since January 2016. While salad dressing and peanut butter prices declined from December to January, butter prices rose 5.5 percent. Prices for fats and oils declined 0.6 percent in 2016. ERS predicts prices to decrease an additional 2.5 to 1.5 percent in 2017.

Prices for fresh fruits decreased 0.6 percent from December to January and were down 2.6 percent compared with January 2016. Fresh fruit prices increased 2.2 percent in 2016. ERS expects fresh fruit prices to increase 1.0 to 2.0 percent in 2017. Fresh vegetable prices were flat in January; however, prices are 9.4 percent lower than January 2016. While prices for potatoes rose 3 percent from December to January, prices for lettuce and tomatoes declined—lettuce prices fell 3.7 percent and tomato priced dropped 1.3 percent. Prices for fresh vegetables were flat in 2016. However, ERS expects fresh vegetable prices to decrease between 1.5 and 0.5 percent in 2017. Factors, such as a stronger U.S. dollar and low oil prices, have mitigated the effect of the drought on retail fresh produce prices throughout 2016. For more detailed information on the California drought, see California Drought: Food Prices and Consumers.  

See Changes in Food Price Indexes, 2015 through 2017.

Key Month-Over-Month Changes in the Food CPI

Beef and veal prices decreased 0.3 percent from December 2016 to January 2017 and are 4.5 percent lower than this time last year. The increased pace of cattle slaughter, especially during the second half of 2016, coupled with increased carcass weights have resulted in higher year-over-year beef production. This higher production and the large supplies of beef held in cold storage have resulted in downward pressure on prices throughout the cattle and beef complex. Prices of both feeder and fed cattle trended lower for most of 2016. These lower prices started to spill into the retail market around August 2016, continuing their downward spiral since then. Prices are expected to continue to decline in the near future. Prices declined 6.3 percent in 2016, and ERS predicts beef and veal prices to decrease an additional 2.5 to 1.5 percent in 2017.

In January, pork prices rose 0.2 percent from the previous month but are 3.5 percent lower year-over-year. Retail pork prices fell in 2016, largely due to ample supplies of other animal proteins available for domestic consumption. Lower beef prices are most likely adding pressure to lower pork prices. Pork prices declined 4.1 percent in 2016. USDA forecasts a 4.9-percent increase in pork production in 2017, and large pork supplies are expected to drive retail prices down an additional 2.0 to 1.0 in 2017.

Egg prices increased 9.5 percent from December to January, but prices are 19.4 percent below January 2016 levels. Retail egg prices are among the most volatile retail food prices, as they can be affected by seasonal demand. There was an upswing in 2015 that was primarily due to the Highly Pathogenic Avian Influenza (HPAI) outbreak, which decreased the table-egg-laying flocks by 36 million egg layers in the second quarter of 2015. In the first quarter of 2016, egg production was down due to smaller flock sizes and lower egg-laying rates per bird. As the industry recovered from this outbreak, with production close to pre-flu levels, egg prices fell 21.1 percent in 2016. ERS expects egg prices to decrease an additional 4.0 to 3.0 percent in 2017.

In January, prices for cereals and bakery products increased 0.6 percent compared with the previous month, but prices are 0.6 percent lower than they were in January 2016. Prices for flour and prepared flour mixes rose 4.9 percent from December to January, and prices for rice rose 0.7 percent. Prices for cereals and bakery products decreased 0.3 percent in 2016. However, ERS expects prices to rise between 0.25 to 1.25 percent in 2017.

Prices for nonalcoholic beverages increased 0.7 percent from December to January but are down 1 percent since January 2016. Carbonated beverage prices increased 1.5 percent from December to January, and prices for coffee rose 2.2 percent over the same time period. Nonalcoholic beverage prices declined 0.4 percent in 2016. However, ERS predicts nonalcoholic beverage prices to increase 0.0 to 1.0 in 2017

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—unprocessed foodstuffs and feedstuffs (formerly called crude foodstuffs and feedstuffs), processed foods and feeds (formerly called 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 intermediate and final demand 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 unprocessed, processed, and finished foods and feeds, but these have historically shown a strong correlation with the all-food and food-at-home CPIs. Unprocessed foods and feeds posted a monthly increase of 3.3 percent from December to January. Prices for processed foods and feeds, however, fell by 0.1 percent, and prices for finished consumer foods decreased 0.7 percent over the same time period.

Inflationary pressures lessened for farm-level cattle and wholesale beef prices in 2016 and are expected to continue to be low in 2017. In January, cattle prices increased 6 percent but are down 12 percent since this time last year. Wholesale beef prices decreased in January, falling 6.8 percent, and are down 8.2 percent from the previous year. In 2016, farm-level cattle prices fell 19.4 percent and wholesale beef prices decreased by 15.5 percent. ERS expects farm-level cattle prices to decrease an additional 6.0 to 5.0 percent, and wholesale beef prices are expected to decline 8.0 to 7.0 percent in 2017.

Wholesale pork prices rose 5.4 percent from December to January, and prices are 7.7 percent higher than this time last year. Overall, pork production is higher, placing downward pressure on prices in 2016—wholesale pork prices declined 1.9 percent. However, ERS predicts prices to increase 0.5 to 1.5 percent in 2017.

Prices for farm-level eggs decreased 31 percent from December to January. Price levels are now 37.3 percent lower than January 2016 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. In 2015, prices were also affected by HPAI, which reduced the count of table-egg-laying birds in many Midwestern and Pacific Northwestern States. As the industry recovered, farm-level egg prices decreased 59.1 percent in 2016. ERS predicts prices to decrease an additional 5.0 to 4.0 percent in 2017.

Farm-level soybean prices decreased 1.4 percent from December to January but are 13.9 percent above the January 2016 price level. Wholesale fats and oils prices increased on the month, rising 2.1 percent in January, and are 6.9 percent higher than January 2016 price levels. Farm-level soybean prices rose 2.9 percent in 2016 and are expected to increase an additional 1.0 to 2.0 percent in 2017. Prices for wholesale fats and oils decreased 0.8 percent in 2016, but ERS expects prices to rise 0.0 to 1.0 percent in 2017.

The drought in California has raised concerns about rising produce prices at supermarkets or grocery stores. Farm-level fruit prices rose 0.8 percent in January but are 4.7 percent lower than in January 2016. Farm-level vegetable prices fell, declining 1.1 percent, and prices are 39.5 percent lower than at this time last year. Farm-level fruit prices increased 11.6 percent in 2016 but are expected to decrease 8.0 to 7.0 percent in 2017. Vegetable prices also increased in 2016—rising 0.9 percent—but prices are expected to decrease 12.0 to 11.0 percent in 2017. 

See Changes in Producer Price Indexes, 2015 through 2017.

Food Price Outlook

Related Topics

Last updated: Thursday, February 23, 2017

For more information contact: Annemarie Kuhns and David Levin

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