Retail Food Prices Seen Rising Again in 2012

For 2012, food inflation is expected to abate from 2011 levels but remain slightly above the long term historical average of the past two decades according to the first 2012 projection by USDA’s ECONOMIC RESEARCH SERVICE and reported by The Food Institute.

For 2012, food inflation is expected to abate from 2011 levels but remain slightly above the long term historical average of the past two decades according to the first 2012 projection by USDA’s ECONOMIC RESEARCH SERVICE and reported by The Food Institute.

Food-at-home prices are seen increasing 3% to 4%, with the all-food CPI projected to increase 2.5% to 3.5% over 2011 levels. While lower than forecasts for 2011, if realized those price advances would still far outpace the minimal inflationary pressure on food prices reported in 2008 and 2009 when food-at-home costs inched up only 0.5% and 0.3% – the lowest annual increase since 1967 – with cereal and bakery product prices declining 0.8% and processed fruit and vegetable prices dropping 1.3%.

Food-away-from-home prices are projected to rise 2% to 3%, less than retail inflation but well above the 1.3% inflation rate of 2010 which was the lowest annual increase for restaurant prices since 1955.

USDA reported that “while many inflationary pressures that drove prices up in 2011 are not expected to intensify and may even decrease in 2012,” retailers have been slow to pass on cost increases to date. Indeed, THE FOOD INSTITUTE has noted this for the past year or so. And it is only in the past two months that retail price gains began to near wholesale price advances.

The Food Institute reports that everyone should note this caveat from USDA: “Price levels in 2012 will hinge significantly on weather conditions in the American Midwest during the remainder of July and into August and September 2011. Because current USDA forecasts are based on a normal weather scenario, sustained heat or drought conditions resulting in reduced supplies and intensified inflationary pressure would result in revised USDA forecasts.”