Retail Food Advances Catch up to Wholesale at End of 2011

For the first time since May, retail food price inflation was within one-tenth of a percentage point of wholesale food price inflation, according to Food Institute analysis of the most recent government data. Both the index Consumer Price Index for food at home and the Producer Price Index for consumer foods were hovering around 6% during December.

For the first time since May, retail food price inflation was within one-tenth of a percentage point of wholesale food price inflation, according to Food Institute analysis of the most recent government data. Both the index Consumer Price Index for food at home and the Producer Price Index for consumer foods were hovering around 6% during December. A 0.5% drop in the wholesale rate during the month was a major factor in bringing the two in tandem, however, largely the result of an 11% drop in fresh vegetable prices. Wholesale vegetable prices were particularly volatile during 2011, noted the Food Institute.

Retailers have been successful in passing along higher costs to consumers over the latter half of 2011 after absorbing a good portion of those advances going back to early 2010.

Retail food prices reflected for food-at-home rose an average 4.8% in 2011 – well above the minor increases of 0.3% and 0.5% in the prior two years and outpacing the overall inflation rate of 3.2% for the year. The increase was still 25% less than the 6.4% retail food inflation rate recorded back in 2008. This also helped bring wholesale and retail food price inflation in sync at the end of 2011.

All of the major grocery store food group indexes tracked by The Food Institute rose in 2011 and all were above prior-year levels during December as well. The largest increase posted for 2011 was for coffee, which jumped 14.7% — the largest annual increase for this staple since 1995 when prices rose 16.2%. The second largest increase was in the meat case, where beef & veal prices jumped 10.2%, following relatively flat pricing over the prior two years and marking the largest annual increase since 2004 when prices rose 11.5%.
The smallest annual increase was in carbonated drinks, which rose only 2.6%, aided by sharp completion during December which resulted in prices dropping 0.7% for the month.

On the wholesale side, although prices for finished consumer foods as measured by the government’s broad measure of wholesale food costs dropped 0.5% in December, this index was still 6.1% higher than 12 months prior during the month and was up 6.3% from 2010 on an annualized basis. During 2011, seven of the 17 major categories tracked advanced in double digits, led by a 28.8% increase in shortening and cooking oil prices – the largest increase for the category since 2008 and the third largest since such records were initiated in 1948.

Significant increases in beef and pork prices during the year also added to the overall increase, with beef & veal costs climbing 15.1% and pork advancing 12.5%. Chicken costs actually declined 3.3%, but turkey rose 12.8% for the year.

Another center-of-the-plate category, seafood, recorded a 5.9% increase in costs.

Next week, the Food Institute will look at new projections for food prices in 2012.