Published on 01/10/00

Food Price Increases the Lowest Since Early 1990s

Consumers are benefitting from a low general inflation rate, with food prices having increased only 2.1 percent in 1999. They are forecast to increase 2 to 2.5 percent in 2000, in part because of large supplies of meats. Food price increases have not been so low since the early 1990s -- when prices increased 1.2 percent in 1992 and 2.2 percent in 1993. The inflation rate for the all-items Consumer Price Index (CPI) was forecast to be 2.1 percent in 1999 and is forecast at 2.2 percent in 2000. The at-home component of the food CPI, which increased 1.9 percent in 1999, is forecast to increase 2 to 2.5 percent in 2000. The away-from-home component, which increased 2.5 percent in 1999, is expected to increase 2.5 to 3 percent in 2000. This component is heavily influenced by competition among restaurants, fast-food establishments, and meals offered by supermarkets.

Food price changes are key in determining what proportion of income consumers spend for food. In 1998, 11 percent of household disposable income went for food -- with 6.7 percent for food at home and 4.4 percent for food away from home. The downward trend should continue in 2000.

Meats. Retail meat prices are forecast up 2 to 3 percent in 2000 as combined red meat and poultry production slips from a record 81.2 billion pounds in 1999 to 80.7 billion pounds in 2000.
- Beef and veal. The CPI for beef and veal is expected to increase another 2-3 percent this year.
- Pork. The pork CPI is expected to increase 2-3 percent this year as pork and beef supplies decline.
- Poultry. The CPI for poultry is expected to be unchanged in 2000, after rising only 0.4 percent in 1999.
Fish and seafood. Despite larger imports of shrimp, tilapia, and salmon, slower growth in U.S. catfish output should lead to an increase of 2 to 3 percent in the fish and seafood CPI for 2000.
Eggs. The CPI for eggs is expected to decline just 1 to 2 percent this year.
Dairy products. With lower prices during the first half of 2000,milk prices for dairy products are expected to remain unchanged in 2000.
Fresh fruits. In 2000, the CPI is expected to rise 2 to 4 percent.
Fresh vegetables. In 2000, the CPI is expected to return to trend growth, up 2 to 4 percent.
Processed fruits and vegetables. The CPI is expected to increase 2-3 percent in 2000.
Sugar and sweets. The CPI is projected up 1.5 to 2.5 percent in 2000 as demand remains strong in the bakery and cereal sector.
Cereals and bakery products. This food category accounts for almost 16 percent of the at-home food CPI and most of the costs to produce cereal and bakery products are for processing and marketing -- more than 90 percent in most cases -- with grain and other farm ingredients accounting for a fraction of total cost. The CPI is forecast up 2 to 3 percent in 2000.
Nonalcoholic beverages. The CPI for nonalcoholic beverages increased 0.9 percent in 1999, led by higher soft drink prices, and is forecast to increase another 2 to 3 percent in 2000.

Consumer Food Price Forecasts - 2000

Unadjusted Percent Change	1998	Forecast 1999	Forecast 2000
All Items	1.6	2.0	2.2
All Food	2.2	2.1	2 to 2.5
Food Away from Home	2.6	2.5	2.5 to 3
Food at Home	1.9	1.9	2 to 2.5
Meats	-1.9	0.5	2 to 3
Beef & Veal	-0.2	1.7	2 to 3
Pork	-4.7	-2.0	2 to 3
Other Meats	-0.9	1.2	2 to 3
Poultry	0.3	0.4	-1 to 1
Fish and Seafood	2.6	1.9	2 to 3
Eggs	-3.3	-3.5	-2 to -1
Dairy Products	3.6	4.8	-1 to 1
Fats & Oils	3.7	1.6	1 to 2
Fruits & Vegetables	5.7	2.2	2 to 3
Fresh Fruits & Vegetables	7.3	2.6	2 to 3
Fresh Fruits	4.3	8.2	2 to 4
Fresh Vegetables	10.9	-3.8	2 to 4
Processed Fruits & Veg.	1.7	1.9	2 to 3
Sugar & Sweets	1.6	1.4	1.5 to 2.5
Cereals & Bakery Products	2.0	2.1	2 to 3
Nonalcoholic Beverages	-0.3	0.9	2 to 3

Sources: Historical data, Bureau of Labor Statistics; forecasts, Economic Research Service, USDA.

(Bill Thomas is an agricultural economist with the University of Georgia College of Agricultural and Environmental Sciences.)

Experts/Sources:

Bill Thomas

Don Shurley

George A. Shumaker

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