USDA Retail Food-Inflation Forecasts for 2012 (Text)
Following is the text detailing forecasts for percentage changes in annual food prices, according to the U.S. Department of Agriculture:
Food Price Outlook, 2012
Food prices surged in the final quarter of 2011, resulting in annual price inflation slightly above ERS’s expectations for beef and veal, eggs, and fats and oils. The food-at-home Consumer Price Index (CPI) increased more than expected--4.8 percent in 2011--which means that food price inflation was not as strong as in 2008 when it increased 6.4 percent over 2007. With inflationary pressures not expected to intensify in 2012, this higher starting point for food prices translates into a moderated outlook for inflation in 2012.
The CPI for all food is projected to increase 2.5 to 3.5 percent in 2012, with food-at-home (grocery store) prices also forecast to increase 2.5 to 3.5 percent and food-away-from-home (restaurant) prices forecast to increase 2 to 3 percent. The average annual increase for food-at-home prices between 1990 and 2011 was 2.8 percent, and ERS’s current outlook for 2012 falls within the historical average for food price inflation. All ERS forecasts for 2012 assume normal weather conditions and no shocks to the global market for major commodities.
See ERS data on CPI for food and CPI forecasts December 2011 Prices (Not Seasonally Adjusted)
The CPI for all food increased 0.2 percent from November to December 2011, increased 0.1 percent from October to November 2011, and is now 4.7 percent above the December 2010 level. The food-at-home CPI increased 0.3 percent in December 2011 and is up 6.0 percent from last December, while the food-away-from-home index was up 0.2 percent in December 2011 and is 2.9 percent above last December. Food commodity and energy price increases over the past year, combined with a weak U.S. dollar, have caused most of the grocery store price increases observed in 2011. The all-items CPI was down 0.2 percent in December and is 3.0 percent above the December 2010 level. The 2011 all-food CPI increased more than both the all-items CPI and the fuel CPI, highlighting the fact that many inflationary factors of the past year were strongest for food markets or specific to food markets.
Beef prices were up 0.9 percent in December and are 11.5 percent above last December, with steak prices up 11 percent and ground beef prices up 11.9 percent. Pork prices decreased 1 percent in December and are 8.1 percent above last December’s level. Poultry prices increased 1 percent in December and are 4.8 percent above prices last year at this time, with chicken prices up 2.9 percent and other poultry prices (including turkey) up 12.4 percent. Beef and pork prices are expected to exceed 2011 levels--by 4 to 5 percent for beef and 3 to 4 percent for pork-- as cattle and hog inventories are expected to remain low relative to demand. Retail poultry prices are expected to increase 3 to 4 percent in 2012.
Egg prices increased 1.4 percent in December 2011; egg prices are now 6.4 percent above the December 2010 level. The inventory of table egg-laying hens in the U.S. decreased for much of 2011, and drought conditions throughout the South have reduced output, contributing to the surge in prices in the final quarter of 2011. However, egg prices are expected to stabilize in 2012, increasing 1 to 2 percent over 2011 levels.
Fish and seafood prices were up 0.7 percent from November to December 2011 and are 6.8 percent above the December 2010 level. Japanese output is expected to continue recovering throughout 2012, but seafood prices should remain high in 2012. The current outlook is for an increase in prices of 4 to 5 percent.
Dairy prices were down 0.1 percent from November to December 2011, compared with a 0.3-percent increase from October to November 2011. Dairy prices are now 8.1 percent above the December 2010 level. Within the dairy category, prices changed as follows in December: milk prices were down 0.1 percent and are 9.2 percent above last December’s prices; cheese prices were down 1.0 percent and are 7.8 percent above last December’s level; ice cream and related product prices were up 0.7 percent and are 9 percent above last December’s level; and butter prices decreased 0.5 percent this month and are 1.9 percent below last December. Fluid milk prices are expected to level off early in 2012 and to remain below the average 2010 farm price. The export market for milk will be a significant factor in the coming year, but current expectations are for retail dairy prices to increase 2 to 3 percent over 2011 levels.
Fresh fruit prices increased 0.6 percent in December, and the fresh fruit index is down 0.5 percent overall from last year at this time, with apple prices up 7.1 percent, banana prices up 3.6 percent, citrus fruit prices down 3.8 percent, and other fresh fruit prices down 3 percent. The fresh vegetable index decreased 0.1 percent in December. Since last year at this time, fresh vegetable prices are up 2.4 percent, with potato prices up 7.4 percent, lettuce prices unchanged, tomato prices up 1.3 percent, and other fresh vegetable prices up 1.9 percent from this time last year. Fresh fruit prices are expected to increase 3 to 4 percent and fresh vegetable prices 1 to 2 percent in 2012. Processed fruit and vegetable prices increased 0.6 percent in December and are 7.0 percent above the December 2010 level. The contracts within the processed fruit and vegetable industry have kept price inflation below that for fresh fruits and vegetables throughout 2011, but 2012 prices are expected to reflect increased fuel and commodity costs. The processed fruit and vegetable index is forecast to increase 3 to 4 percent in 2012.
Cereal and bakery product prices increased 0.2 percent from November to December 2011 and are up 6.1 percent from last year at this time, with bread prices up 6.7 percent and breakfast cereal prices up 6.5 percent over the past year. Lower yields for hard red varieties of wheat due to a number of weather- related factors raised wheat prices for 2011. However, these price increases have not been passed on to retail prices to the extent expected, and the cereals and bakery index is expected to increase 3.5 to 4.5 percent in 2012. Sugar and sweets prices were up 0.4 percent in December and are 3.8 percent above last December. The 2012 outlook is for an increase of 2 to 3 percent over 2011 levels. Prices for nonalcoholic beverages, including coffee and carbonated beverages, are down 0.1 percent in December 2011 and are up 5.8 percent from last year. This index is forecast to increase 1.5 to 2.5 percent in 2012.
The index for fats and oils was up 1.2 percent from November to December 2011 and is 13.5 percent above the December 2010 level. The significant price increases in 2011 were due in large part to surging soybean prices which are expected to stabilize somewhat. The fats and oils index is projected to increase an additional 2.5 to 3.5 percent in 2012. 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.
SOURCE: U.S. Department of Agriculture
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