Source: Rita Jane Gabbett, MEATINGPLACE, 10/25/16


The gap between the cost of buying groceries and going out to eat looks like it will continue to widen, according to USDA’s latest Food Price Index. Leading the decline in grocery prices are cheaper beef, pork, poultry and eggs. 

While the Consumer Price Index for all food rose 0.1 percent from August to September, food prices were 0.3 percent lower compared with September 2015.

The food-away-from-home (restaurant purchases) CPI was up 0.2 percent in September and was 2.4 percent higher than September 2015, while the food-at-home (grocery store or supermarket food items) CPI was flat from August to September and was 2.2 percent lower than last September.  Retail food prices have remained flat or decreased for 7 of the first 9 months in 2016.

Food-away-from-home prices have been rising consistently month-over-month due, in part, to differences in the cost structure of restaurants versus supermarkets or grocery stores. 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 2016, USDA now predicts food-at-home (supermarket) prices to change in a range between a decrease of 0.75 percent and an increase of 0.25 percent — a rate of inflation (or possibly deflation) that would fall below the 20-year historical average inflation rate of 2.5 percent.

The forecast has been lowered due to recent declines in prices for beef and veal, poultry and eggs. Lower transportation costs due to deflated oil prices as well as the strength of the U.S. dollar have placed additional downward pressure on food prices in the first half of 2016. A strong U.S. dollar makes U.S. goods less desirable, leaving more potential exports on the domestic market. Comparing the 2015 average price level with the 2016 level to date, the CPI for food-at-home is down 1.1 percent.

Beef
Beef and veal prices decreased 0.7 percent from August to September and were 7 percent lower than this time last year. In previous months, price changes were affected by declining U.S. beef exports, which helped to increase the supply of beef on the U.S. market. This greater supply, along with weak beef demand, has placed downward pressure on retail beef prices.

Additionally, favorable pasture conditions in some areas and lower feed prices have allowed cattle producers to feed cattle longer and to hold cattle for herd expansion. Aided by a strong (though somewhat weaker) dollar, lower prices have led U.S. beef to become more attractive abroad.

USDA predicts beef and veal prices will decrease by 6.5 to 5.5 percent in 2016 and increase by 1 percent to 2 percent in 2017.

Pork
In September, pork prices fell 1 percent from the previous month and were 3.6 percent lower year-over-year. In 2014, retail pork inflation was largely due to the effects of Porcine Epidemic Diarrhea virus (PEDv), which had reduced the autumn number of hogs ready for production. In 2015, however, hog prices fell below 2014 figures, as there were signs of industry expansion and a lower volume of pork exports due to the strength of the U.S. dollar.

Pork production is expected to continue expanding in the second half of 2016, and USDA predicts pork prices will decrease by between 3.5 percent and 2.5 percent in 2016. However, lower wholesale pork prices and a moderating exchange rate would increase pork exports. Therefore, USDA expects pork prices in 2017 to remain flat or rise by up to 1 percent.

Poultry
U.S. poultry prices rose by 0.5 percent from August to September, but were down by 1.5 percent from last September.
USDA left its poultry price projections unchanged from last month, predicting a price decline between 2 percent and 1 percent for all of 2016 and predicting a price increase in 2017 between 1.5 percent and 2.5 percent.

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