Has Food Price Inflation Peaked?

Articles
November 23, 2011

Has Food Price Inflation Peaked?

With holidays now upon us, consumers are of course concerned about what is happening with food prices. The Food Institute reports that during October, grocery prices were up 6.2% from a year earlier – the third straight month this index was up over six percent from 2010 levels.

With holidays now upon us, consumers are of course concerned about what is happening with food prices. The Food Institute reports that during October, grocery prices were up 6.2% from a year earlier – the third straight month this index was up over six percent from 2010 levels. But according to the Food Institute Price Tracker, which projects food prices for the next three months, retail food price inflation appears to have peaked and will moderate somewhat in early 2012.

Wholesale food prices dropped sharply in October, narrowing the gap between retail and wholesale food price inflation. On the wholesale level as represented by the government’s Producer Price Index, more than half of 17 categories tracked by The Food Institute declined from the prior month, and processed young chickens were actually offered 3.4% under year earlier levels. On the flip side, wholesale prices for shortening and cooking oils were priced nearly one-third higher than the prior year - not good news for bakers.

Bottom line is retailers continue to absorb a good portion of the price hikes they are encountering as their food costs are up 7.5% last month, but their pricing increased 6.2%. But that gap is now at its narrowest margin since May when retail price advances last exceeded wholesale during the month.

After three consecutive months of prices for food-at-home increasing 0.6% each month, food-at-home (retail) food prices advanced only 0.2% in October. This brought the annualized retail food inflation rate to 4.6% for the 10 months ended Nov. 1, however – well above 2010’s one-tenth of one percent rise during the same period.

The slowdown in the rate of increase was largely due to a drop in fresh produce prices, and more modest increases in other major categories.

If you would like a sample of the latest Food Institute report, just e-mail April at april.brendel@foodinstitute.com, for a complete rundown on the latest government data economic on the food business.