Food CPI and Expenditures: Analysis and Forecasts of the CPI for Food

Food CPI, Prices, and Expenditures Briefing Room Analysis and Forecasts of the CPI for Food What's Behind the Forecasts? How Changes in Input Costs Affect Food Prices CPI Bias Three Types of Food Expenditures Series Measuring the ERS Food Expenditure Series

Food Price Outlook, 2009

In 2009, the Consumer Price Index (CPI) for all food is projected to increase 3.0 to 4.0 percent, as lower commodity and energy costs combine with weaker domestic and global economies to pull inflation down from 2008 levels. If commodity food and energy costs remain below 2008 levels, pressure on retail food prices will subside, and this could result in low-to-moderate food price inflation in 2009.

Food-at-home prices are forecast to increase 2.5 to 3.5 percent, while food-away-from-home prices are forecast to increase 3.5 to 4.5 percent in 2009. The all-food CPI increased 5.5 percent between 2007 and 2008, the highest annual increase since 1990. Food-at-home prices, led by fats and oil prices (up 13.8 percent) and cereals and bakery product prices (up 10.2 percent), increased 6.4 percent, while food-away-from-home prices rose 4.4 percent in 2008.

See ERS data on CPI for food and CPI forecasts

January 2009 Prices

The CPI for all food increased 0.4 percent from December 2008 to January 2009, was unchanged from November to December 2008, and is now up 5.3 percent from the January 2008 level. The food-at-home index increased 0.5 percent in January 2009 and is now 5.7 percent above last January, while the food-away-from-home index increased 0.3 percent and is now 4.9 percent above last January. The all-items CPI increased 0.4 percent in January but is unchanged from the January 2008 level, mostly due to the decline in energy prices during the fourth quarter of 2008.

Beef prices decreased an additional 1.3 percent in January following a 1.2-percent decline in November and a 0.2-percent decline in December, as weaker consumer demand has started to have an impact on retail beef prices. Beef prices are still 4.8 percent above last January, as higher feed and operating costs for beef production for most of 2007 and 2008 caused an increase in retail beef prices for most of 2008. Pork prices decreased 0.4 percent in January but are still 3.9 percent above last January’s level. Poultry prices decreased 0.2 percent in January but are up 4.1 percent from last year at this time. As substantially lower feed and energy costs are incorporated into meat production costs, retail meat price inflation should begin to moderate over the next few months.

Egg prices increased 1.2 percent in January but are still 9.5 percent below the January 2008 level.

Dairy prices were down 0.6 percent in January but are still up 1.3 percent from the January 2008 level. Within the dairy category, prices changed as follows in January: milk prices decreased 1.4 percent (the fourth price decline in the past 5 months) and are 4.5 percent below last January’s prices; cheese prices were down 0.7 percent but are still 5.5 percent above last January’s level; ice cream and related product prices increased a mostly seasonal 1.3 percent and are 6.5 percent above last January; and butter prices were unchanged this month but are still 4.9 percent above last January.

Fresh fruit prices decreased 1.6 percent in January, due to decreases in apple, citrus, and other fruit prices. The fresh fruit index is now down 4.9 percent overall from last year at this time, with apple prices down 0.6 percent, banana prices up 19.5 percent, citrus fruit prices down 4.0 percent, and other fresh fruit prices down 13.0 percent. The fresh vegetable index increased a completely seasonal 1.4 percent in January, mostly due to a 2.7-percent increase in other fresh vegetable prices. Since last year at this time, fresh vegetable prices are up 0.9 percent, with lettuce prices up 3.2 percent, potato prices up 23.5 percent, tomato prices down 16.3 percent, and other fresh vegetable prices up 0.4 percent.

Cereals and bakery product prices were up 0.5 percent from December 2008 to January 2009. Surging wheat prices caused cereal and bakery product prices to increase sharply in 2008, but with current wheat commodity prices down over 40 percent from a March 2008 high, retail cereals and bakery product price inflation should begin to moderate over the next few months. Nonetheless, cereals and bakery product prices are up 11.3 percent from last year at this time as higher wheat, corn, and energy prices pushed production costs for these products up sharply in 2008. Sugar and sweets prices were up 2.1 percent in January and are 9.6 percent above last January. Within the nonalcoholic beverages category, prices changed as follows in January: carbonated drink prices were up 2.5 percent and are up 7.8 percent from January 2008; coffee prices increased 1.1 percent and are 4.6 percent higher than last January; and nonfrozen noncarbonated juices and drinks prices were down 0.2 percent in January but are still 2.7 percent above the January 2008 level.