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

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