ERS reports slowed inflation rates in 2012 food price outlook
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WASHINGTON, June 26, 2012- The USDA Economic Research Service reported the Consumer Price Index (CPI), a composite measure of the level of average prices paid by urban consumers, for all food is projected to increase 2.5 to 3.5 percent in 2012.
This projection includes “food-at-home,” or grocery store, prices forecast to increase 2.5 to 3.5 percent and “food-away-from-home,” or restaurant, prices forecast to increase two to three percent.
“The average annual increase for food-at-home prices between 1990 and 2011 was 2.8 percent, and ERS's current outlook for 2012 falls within the historical average for food price inflation,” according to the report.
The year-over-year increase in the food-at-home CPI fell each month in 2012, indicating that food price inflation has slowed down, ERS reported.
ERS noted that food prices surged in the final quarter of 2011, resulting in annual price inflation slightly above expectations for beef and veal, eggs, and fats and oils. The food-at-home CPI increased more than expected, at 4.8 percent in 2011 and “with inflationary pressures not expected to intensify in 2012, this higher starting point for food prices translates into a moderated outlook for inflation in 2012,” ERS noted.
The CPI for all food remained unchanged from April to May this year, but increased 0.2 percent from March to April, and is now 2.8 percent above the May 2011 level. The following information is broken down by commodity:
Beef prices were up 0.6 percent in May and are 5.4 percent above last May, with steak prices up 5.6 percent and ground beef prices up 5.9 percent. Pork prices decreased 0.8 percent in May and are 0.3 percent below last May's level. Retail prices have started to fall in accordance with wholesale prices, resulting in ERS's revised forecast of a 2- to 3-percent increase for pork prices in 2012. Poultry prices decreased 1.4 percent in May and are 3.9 percent above prices last year at this time, with chicken prices up 2.5 percent and other poultry prices (including turkey) up 8.9 percent.
Egg prices decreased 5.9 percent in May; egg prices are now 1.4 percent above the May 2011 level. Egg price inflation is returning to historically average levels, as the domestic inventory of egg-laying hens in the U.S. continues to increase.
Fish and seafood prices were down 0.4 percent from April to May and are 1.9 percent above the May 2011 level. Japanese output is expected to continue recovering throughout 2012, but seafood prices should remain high in 2012.
Dairy prices were down 0.4 percent from April to May, compared with a 1-percent decrease from March to April. Dairy prices are now 2.3 percent above the May 2011 level. Within the dairy category, prices changed as follows in May: milk prices were unchanged and are 0.4 percent below last May's prices; cheese prices were down 0.7 percent and are 2.4 percent above last May's level; ice cream and related product prices were down 1.1 percent and are 6.1 percent above last May's level; and butter prices increased 1.7 percent this month and are 9.9 percent below last May. Fluid milk prices are expected to remain below the average 2011 farm price; this should restrict overall dairy retail price inflation for the year.
Fresh fruit prices increased 1.7 percent in May, and the fresh fruit index is up 2.6 percent overall from last year at this time, with apple prices up 5 percent, banana prices down 1 percent, citrus fruit prices up 3.5 percent, and other fresh fruit prices up 2.5 percent. The fresh vegetable index decreased 0.8 percent in May. Since last year at this time, fresh vegetable prices are down 6.9 percent, with potato prices down 4.7 percent, lettuce prices down 10.2 percent, tomato prices down 19.7 percent, and other fresh vegetable prices down 2 percent. Unseasonably warm weather and favorable growing conditions thus far in 2012 have resulted in prices and output for many vegetable crops that contrast sharply with prices and output for this time last year. Processed fruit and vegetable prices increased 0.5 percent in May and are 5.4 percent above the May 2011 level. The contracts within the processed fruit and vegetable industry have kept price inflation below that for fresh fruits and vegetables throughout 2011, but 2012 prices are expected to reflect increased fuel and commodity costs.
Cereal and bakery product prices increased 0.2 percent from April to May and are up 3.7 percent from last year at this time, with bread prices up 3 percent and breakfast cereal prices up 3 percent over the past year. Sugar and sweets prices were down 0.5 percent in May and are 4.6 percent above last May. Prices for nonalcoholic beverages, including coffee and carbonated beverages, are down 0.8 percent in May and are up 1.2 percent from last year.
The index for fats and oils was up 0.7 percent from April to May and is 7.8 percent above the May 2011 level. The significant price increases in 2011 were due in large part to surging soybean prices. Soybean production in South America is expected to decrease considerably in 2012, which may apply more pressure on U.S. exports.
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