Source: Rita Jane Gabbett, MEATINGPLACE, 1/30/18


USDA released its monthly Consumer Price Index for food, showing consumers paid less for pork in December than in November, but more for beef and poultry.

The CPI for all food rose 0.1 percent from November to December, and food prices were 1.6 percent higher than the December 2016 level. The food-away-from-home (restaurant purchases) CPI rose 0.2 percent in December and is 2.5 percent higher than December 2016. The food-at-home (grocery store or supermarket food items) CPI was up 0.1 percent from November to December and is 0.9 percent higher than last December.

Restaurant prices have been rising consistently month-over-month due, in part, to differences in the cost structure of restaurants versus supermarkets or grocery stores. Prices at food-at-home outlets have posted lower year-over-year price increases. Restaurant prices primarily comprise labor and rental costs with only a small portion going toward food. For this reason, decreasing farm-level and wholesale food prices have had less of an impact on restaurant menu prices.

In 2017, supermarket prices decreased for the second year in a row, falling 0.2 percent. Inflation has been lower than average due, in part, to a stronger U.S. dollar which makes imported foods relatively less expensive and the sale of domestic food products overseas more difficult.

In 2018, retail food prices are expected to rise between 1.0 to 2.0 percent. While fats and oils, vegetables, pork, and processed fruits and vegetables could potentially decline in price, prices for beef and veal, poultry, eggs, and dairy are expected to increase.

Beef and veal
Beef and veal prices increased 0.5 percent from November to December and are 3.5 percent higher than this time last year. Greater year-over-year cattle placements in feedlots in the fourth quarter of 2017 indicate that the number of cattle outside of feedlots available for placement remains large. Thus, the forecast is higher for commercial beef production in 2018 due to slightly higher expected carcass weights combined with more cattle being put on the market and greater expected slaughter.
Although cattle prices have been stronger than previously expected in late 2017, prices throughout the cattle and beef complex in 2018 are likely to remain below levels in 2017. In 2017, beef and veal prices decreased 1.2 percent but are expected to rebound, increasing by 1.5 to 2.5 percent in 2018.

Pork
In December, pork prices fell 1.5 percent from the previous month, but prices are 3.1 percent higher than in December 2016. Lower beef prices are most likely adding pressure to lower pork prices. Although USDA forecasts a 4.9-percent increase in pork production in 2017, strong consumer demand for pork (particularly for cuts such as bacon) held retail prices above 2016 prices, increasing 0.6 percent. In 2018, pork prices are expected to change between -0.5 and 0.5 percent.

Poultry
Prices for poultry rose 1.6 percent from November to December and are 2.5 percent higher than last year. While prices may increase at the retail level, price increases are still expected to be lower than the 20-year historical average of 2.0 percent.
Poultry prices rose 0.2 percent in 2017 and are expected to increase an additional 1.5 to 2.5 percent in 2018.

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