Consumer food costs are rising and USDA has raised its forecast for overall food price inflation and its outlook for food at home (grocery store) and food away from home (restaurant) prices. Overall food price inflation is now seen at 2.5% to 3.5% in 2021, up from their month-ago outlook that food price inflation would be at 2% to 3%. Grocery store prices are now seen rising 2% to 3% in 2021 compared with their month-ago outlook that grocery store prices would rise 1.5% to 2.5%. Restaurant prices are now seen up 3% to 4% from 2020 levels, an increase from the prior outlook they would increase 2.5% to 3.5%.
The updated forecasts also mean that prices are seen rising for all three categories by more than their 20-year average. Those averages are 2.4% for all food prices, 2.8% for restaurant prices and 2% for grocery store prices. Despite the increased outlooks, overall food Consumer Price Index (CPI) inflation in 2021 is currently seen under the increase registered in 2020 of 3.4%. And for grocery store prices, the increase is also under the 3.5% increase seen in 2020. Restaurant prices, however, are now seen rising just above the 3.4% mark seen in 2020.
The year-to-date average of food prices in 2021 compared with the same period in 2020 has also increased, with grocery store prices up 1.4% with restaurant prices up 2.5%. The CPI for all food has increased an average of 1.9%. USDA’s Economic Research Service (ERS) noted that of all grocery store prices they track, “the fresh fruits category has had the largest relative price increase (4.8%) and the fresh vegetables category the smallest (0.3%). No 2021 price categories decreased compared to 2020 prices.”
Restaurant store prices rose 0.6% in May and were up 4% from May 2020, while grocery store prices were up 0.3% from April and up 0.7% from year-ago levels.
Forecast ranges for fresh fruits, fats and oils, poultry, pork, and beef and veal, as well as the aggregate categories of “meats” and “meats, poultry, and fish” were revised upward this month by ERS, with the forecast range for the category of “other foods” was revised downwards.
Increases in meat prices in May compared with April “were driven by high feed costs and strong domestic and international demand,” ERS noted. “In addition, winter storms and drought disrupted the beef supply, and high prices for sows dampened pork production.” But, ERS noted that beef prices were 2.6% lower in May 2021 than in May 2020. Beef and veal prices are now predicted to increase between 2% and 3% percent in 2021 (1.5% to 2.5% prior) while pork prices are now predicted to increase between 3% and 4% ((2% to 3% prior) and poultry prices are seen rising from 1.5% to 2.5% (0.5% to 1.5% prior).
While fresh fruit and vegetable prices fell 0.1% in May compared with April, they are still 4.8% above 2020. Fresh fruit prices are now predicted to increase 4% to 5% in 2021 (3.5% to 4.5% prior).
Fats and oils prices increased 1% in May compared with April after rising 1.2% in April compared with March. “These increases, fueled in part by high farm-level soybean and wholesale fats and oils prices, rendered retail fats and oils prices 1.9% higher, on average, in 2021 compared to 2020,” ERS said. Fats and oils prices are now seen rising 2.5% to 3.5% in 2021 (2% to 3% prior).
Comments: Consumers are facing higher prices for food on several fronts, but so far they are not yet seen rising as much as they did in 2020. The pandemic obviously is factoring into the price situation. And the level of food price inflation is either now in line with or moving above the 20-year average for a second consecutive year. And leading up to 2020 and now 2021, consumers saw grocery store prices either increasing at less than the 20-year average or decreasing over the 2015 to 2019. But the food price situation is now taking a bigger share of consumer incomes as they work their way out of the pandemic and that could become a concern especially if energy prices continue to move higher. The more-volatile nature of food and energy prices is also why those prices are stripped out to provide a “core” reading on inflation in the U.S. economy.