Retail Food Price Outlook
USDA Agricultural Outlook Forum
February 19, 2015
Annemarie Kuhns
USDA, Economic Research Service
2014 inflation near historical average
Percent change in the annual Consumer Price Index
(CPI) for food at home, 1995 - 2014
Percent Change
7
6
20-year average:
2.6%
5
4
3
2
1
0
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Source: USDA, Economic Research Service using Bureau of Labor Statistics data.
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Annual percent change in food prices by category, 2014
Beef and veal
Pork
Poultry
Fish and seafood
Eggs
Dairy products
Fats and oils
Fresh fruits
Fresh vegetables
Sugar and sweets
Cereals and bakery products
Nonalcoholic beverages
Other foods
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Percent Change, 2013-2014
12.0
14.0
Source: USDA, Economic Research Service using Bureau of Labor Statistics data.
3
Annual percent change in food prices by category, 2012
Beef and veal
Pork
Poultry
Fish and seafood
Eggs
Dairy products
Fats and oils
Fresh fruits
Fresh vegetables
Sugar and sweets
Cereals and bakery products
Nonalcoholic beverages
Other foods
-6.0
-4.0
-2.0
0.0
2.0
Percent Change, 2011-2012
4.0
6.0
8.0
Source: USDA, Economic Research Service using Bureau of Labor Statistics data.
4
Grocery versus restaurant purchases, 2013
Food at home
59%
Average
American’s
Food
Purchases
Food away from home
41%
Source: USDA, Economic Research Service using U.S. Bureau of Labor Statistics
Consumer Expenditure Survey, 2013
5
Food purchases by category, 2013
Other foods
11%
Nonalcoholic beverages
7%
Cereals and bakery
products
8%
Average
American’s
Food
Purchases
Sugar and sweets
2%
Food away from home
41%
Fruits and vegetables
10%
Fats and oils
2%
Dairy products
6%
Eggs
1%
Meats, poultry, and fish
12%
Source: USDA, Economic Research Service using U.S. Bureau of Labor Statistics
Consumer Expenditure Survey, 2013
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Annual percent change in food at home and food
away from home CPIs, 1990-2014
Percent
7.0
6.0
Food At Home
Food Away From Home
5.0
4.0
3.0
2.0
1.0
0.0
Source: USDA, Economic Research Service using Bureau of Labor Statistics data.
7
8
Percent change in the all-items consumer
price index (CPI) and food CPI, 1984 - 2014
Percent Change
7.0
6.0
5.0
4.0
3.0
2.0
1.0
Economy-wide Inflation
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
-1.0
1984
0.0
Food Inflation
Source: USDA, Economic Research Service using Bureau of Labor Statistics data.
9
Percent change in the Consumer Price
Index (CPI) by sub-category, 1984-2014
12.0
10.0
8.0
6.0
4.0
2.0
0.0
1984
1989
1994
1999
2004
2009
2014
-2.0
-4.0
-6.0
-8.0
Apparel
Housing
Transportation
Food
Medical care
-10.0
Source: USDA, Economic Research Service using Bureau of Labor Statistics data.
10
Annual percent change in price,
by stage of production
Percent change
30.0
25.0
20.0
PPI - Farm Products
PPI - Processed Foodstuff and Feedstuff
CPI - All Food
15.0
10.0
5.0
0.0
1985
-5.0
1990
1995
2000
2005
2010
-10.0
-15.0
-20.0
Source: USDA, Economic Research Service using Bureau of Labor Statistics data.
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Where a food dollar goes…
Source: USDA, Economic Research Service, 2012
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Pass through percentages and times
Retail Category
Time to Pass Through
(Months)
Beef
1 to 2
Pork
1 to 3
Poultry
1 to 2
Eggs
3 to 5
Milk
1 to 5
Bread
1 to 6
Oranges
1 to 2
Lettuce
1 to 2
Source: Leibtag, E. "How Much and How Quick? Pass Through of Commodity and Input Cost Changes to Retail Food Prices," American Journal of
Agricultural Economics 91: 1462-67, 2009.
13
Annual grocery store inflation by metropolitan
statistical area, 2014
Percent Change
3.5
3
2.5
2
1.5
1
Pittsburgh
New York
Atlanta
Detroit
Chicago
St. Louis
Houston
Las Angeles
Anchorage
0
Seattle
0.5
Annual percent change scale
0 to 2 %
2% to 3 %
> 3%
National Average
Source: USDA, Economic Research Service using Bureau of Labor Statistics data.
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Potential for drought to impact food
prices
• CA drought impact on food prices
– Potential to have long an lasting effects on fruit,
vegetable, dairy, and egg prices
– Length and severity is not yet realized
– Crop decisions affect prices further down the line
• Drought conditions in Texas/Oklahoma impact
beef and veal prices, but are improving
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16
Drought severity and food prices
Percent of California land in drought,
annual average, by severity
Average annual price index,
1982-84 = 100
100%
380
90%
360
80%
340
Drought severity from
least to most severe
No drought
Abnormally dry
Moderate
70%
320
Severe
Extreme
60%
300
50%
Exceptional
280
40%
260
30%
240
20%
220
10%
0%
Retail food category
Fresh fruits
Fresh vegetables
200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Source: USDA, Economic Research Service using data from The National Drought Mitigation
Center and the U.S. Bureau of Labor Statistics.
17
Energy prices and food prices
• The importance of energy prices depends on
the food category
– More important as processing and transportation
costs increase in share
• Diesel and electricity prices are key inputs to
ERS CPI forecast models
18
Price of crude oil and change in Consumer Price Index
(CPI) for selected food categories
120.00
Average annual price
index, 1982-84 = 100
400.0
105.00
350.0
90.00
300.0
75.00
250.0
60.00
200.0
45.00
150.0
30.00
100.0
15.00
50.0
0.00
0.0
Dollars per barrel
1994
1998
2002
Crude oil price (West Texas Intermediate)
2006
2010
Fresh Produce CPI
2014
Cereals and bakery products CPI
Source: USDA, Economic Research Service using data from the St. Louis
Federal Reserve Economic Data (FRED) and U.S. Bureau of Labor Statistics.
19
2015 inflation predicted to be near historical average
Percent change in the annual Consumer Price Index
(CPI) for food at home, 1995 - 2015
Percent Change
7
20-year average:
2.6%
6
5
4
3
2
1
0
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Source: USDA, Economic Research Service using Bureau of Labor Statistics data.
20
2015 forecast intervals, by retail food category
Percent Change
7
6
5
4
3
2
1
0
Source: USDA, Economic Research Service.
21
Food categories to watch in 2015:
Beef and veal
• Retail beef and veal prices forecast to rise 5 to 6%
in 2015
• Reductions in U.S. cattle inventory
- Herd sizes similar to the 1950s
- Texas and Oklahoma drought further delayed herd expansion
• Expectation of herd expansion in 2015
22
Food categories to watch in 2015:
Fresh produce
• Fresh fruit prices are expected to rise 2.5 to 3.5
percent
– California drought
• Fresh vegetable prices are expected to rise 2 to 3
percent
– Potential for further impacts from California drought
23
Food categories to watch in 2015:
Eggs
• Egg prices rose 8.4% in 2014 and expected to
rise 2.5 to 3.5 percent in 2015
- Prices are volatile and vary seasonally
- Will the new law in CA requiring larger cages for
birds have an effect?
24
Food categories to watch in 2015:
Non-perishable food items
• Fats and oils and cereals and bakery products
are expected to see below average inflation
– Large crop yields for soybeans and wheat
– Fats and oils are expect to rise 0 to 1 percent
– Cereals and bakery products predicted to rise 0.5 to
1.5 percent
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Amber Waves:
Presents current ERS economic and policy
research on agriculture, food, rural
America, and the environment for
policymakers, academics and the public.
• Via web connection or mobile app
http://www.ers.usda.gov/AmberWaves/
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Resources for food
price trends research
• ERS CPI Forecasts:
http://www.ers.usda.gov/data-products/food-priceoutlook.aspx
• ERS California Drought Page:
http://www.ers.usda.gov/topics/in-the-news/californiadrought-2014-farm-and-food-impacts/california-drought-2014food-prices-and-consumers.aspx
• AMS Fruit and Vegetable Report
http://www.ams.usda.gov/mnreports/fvwretail.pdf
• IMF World Commodity Prices
http://www.imf.org/external/np/res/commod/index.asp
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Thank You!
Contact Information:
Annemarie Kuhns
[email protected]
202- 694-5351
OR
David Levin
[email protected]
202-694-5353
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