Wholesale Pressures Push Food Prices Higher

USDA raised its price projection for food price inflation this year, indicating that the average household will spend approximately $25 more on food this year than previously expected, including about $19 spent for food consumed at home, according to estimates from The Food Institute.

USDA  raised its price projection for food price inflation this year, indicating that the average household will spend approximately $25 more on food this year than previously expected, including about $19 spent for food consumed at home, according to estimates from The Food Institute.

Although USDA lifted its 2011 price protection last week it was not unexpected according to The Food Institute which notes the new projections are more in line with what has been seen in the Consumer and Producer Price reports from the Bureau of Labor Statistics in recent months. The Consumer Price Index (CPI) for all food is now projected to increase 3.5% to 4.5%, with food-at-home (retail) prices forecast to rise 4% to 5% but trending toward the upper end of that range according to Food Institute projections. Those are both up about one half a percentage point Food-away-from-home (restaurant) prices are forecast to increase 3% to 4% this year on the heels of a minimal 1.3% increase in 2010.

Center-of-the-plate items contributed significantly to the higher price projection for 2011, with meat, poultry and fish accounting for one-eighth of the entire food-at-home CPI figure and for which prices are seen climbing as much as 6.5% this year following almost no inflation the prior two years. According to USDA: “Due to higher input costs, beef and pork prices remain significantly higher than in 2010. The beef and pork industries also downsized their inventories during the high price inflation of 2007-08, and the supply of these commodities remains low relative to demand.”

As for seafood, higher feed costs and global market disruptions as result of the Japanese tsunami have led to fish and seafood prices that are considerably higher than 2010 levels.  Seafood prices in 2011 are still projected to rise as much as 6.5% from 2010.
Egg prices remain high and are projected to climb as much as 6% this year, the same inflation rate reported for September. USDA noted that the table egg-laying hen inventory decreased for five of the first seven months of 2011, and it is closely monitoring egg production for the 2012 price outlook.

The index for fats and oils was up 11.3% above 2010 levels in September and are seen being up 6.5% to 7.5% for the entire year, due in large part to surging soybean prices.

No significant change in 2012 projections thus far at this early date, with food price inflation is expected by USDA to abate from 2011 levels but still be slightly above the historical average for the past two decades.