Food Price Outlook, 2008
In 2008, the Consumer Price Index (CPI) for all food is projected
to increase 5.0 to 6.0 percent, as retailers pass on higher commodity
and energy costs to consumers in the form of higher retail prices
for most of the year. The main factors behind higher food commodity
costs include:
- Stronger global demand for food
- Increased U.S. agricultural exports resulting from stronger demand and a weaker
dollar
- Weather-related production problems in some areas of the
world
- Increased use of some food commodities, such as corn, for
bioenergy uses
As commodity food and energy costs have
declined over the past few weeks, pressure on retail food prices
may begin to subside. Assuming that recent lower commodity prices
are not short term, the recent price decline could result in lower
retail food price inflation in 2009.
Food-at-home prices are forecast to increase 5.5 to 6.5 percent,
while food-away-from-home prices are forecast to increase 3.5
to 4.5 percent in 2008. The all-food CPI increased 4.0 percent
between 2006 and 2007, the highest annual increase since 1990.
Food-at-home prices, led by egg, dairy, and poultry prices, increased
4.2 percent, while food-away-from-home prices rose 3.6 percent
in 2007.
See
ERS data on CPI for food and CPI forecasts
September 2008 Prices
The CPI for all food increased 0.6 percent from August to September
2008, 0.5 percent from July to August, and is now 6.2 percent
higher than the September 2007 level. The food-at-home index increased
0.6 percent in September and is now 7.6 percent above last September,
while the food-away-from-home index increased 0.5 percent and
is now 4.5 percent above last September. The all-items CPI decreased
0.1 percent in September but is currently 4.9 percent above the
September 2007 level.
Beef prices increased 0.2 percent in September
and are 6.1 percent above last September, as higher energy and
feed costs continue to increase retail beef prices. Pork
prices jumped 1.5 percent in September and are now 5.7 percent
above last September’s level. Pork prices have begun to
rise (also attributable to higher feed and energy costs), following
a period of relatively mild inflation in the first half of 2008
due to strong pork supplies. Poultry prices increased
0.7 percent in September and are up 4.1 percent from last year
at this time. Higher feed and energy costs in 2007 and 2008 have
caused poultry prices to rise faster than normal over the past
18 months.
Egg prices jumped 4.6 percent in September and
are 3.7 percent above the September 2007 level.
Dairy prices were down 0.6 percent in September
but are still up 4.9 percent from the September 2007 level. Within
the dairy category, prices changed as follows in September: milk
prices dropped 1.5 percent and are 0.3 percent below last
September’s prices; cheese prices were
down 0.3 percent but are still 11.0 percent above last September’s
level; ice cream and related product prices increased
1.0 percent and are 5.4 percent above last September; and butter
prices increased 0.2 percent and are 4.0 percent above last September.
Fresh fruit prices increased 2.1 percent in
September, largely due to a 5.2-percent increase in other fresh
fruit prices. The fresh fruit index is now up 9.2 percent overall
from last year at this time, with apple prices up 21.7 percent,
banana prices up 21.1 percent, and citrus fruit prices up 3.4
percent. The fresh vegetable index decreased
0.6 percent in September, mostly due to a 4.6-percent decrease
in tomato prices. Since last year at this time, fresh vegetable
prices are up 10.3 percent, with lettuce prices up 8.8 percent,
tomato prices up 7.9 percent, potato prices up 33 percent, and
other fresh vegetable prices up 3.6 percent.
Cereals and bakery product prices increased
0.3 percent from August to September 2008. Surging wheat prices
caused cereal and bakery product prices to increase 1 percent
or higher in 6 of the past 9 months. With wheat commodity prices
dropping over the past 2 months, retail cereal and bakery product
price inflation should begin to moderate over the next few months.
Nonetheless, cereals and bakery product prices are still up 12.3
percent from last year at this time as higher wheat, corn, and
energy prices have pushed production costs for these products
up sharply over the past year. Sugar and sweets
prices were up 1.1 percent in September and are 6.6 percent above
last September. Within the nonalcoholic beverages category, prices
changed as follows in September: carbonated drink
prices were down 3.6 percent and are up 4.8 percent from September
2007; coffee prices decreased 0.4 percent but
are still 9.3 percent higher than last September; and nonfrozen
noncarbonated juices and drinks prices were up
0.3 percent in September and are 4.1 percent above the September
2007 level.
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. |
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