• The findings summarizes the January 2024 forecasts, which incorporate the December 2023 Consumer Price Index and Producer Price Index numbers.

By USDA

Published January 26, 2024

Washington, DC – (Highpoint Digest) – The USDA, Economic Research Service (ERS) Food Price Outlook (FPO) provides data on food prices and forecasts annual food price changes up to 18 months in the future. On a monthly basis, USDA, ERS forecasts the annual percentage change in food prices for the current year and, beginning in July each year, for the following year. These forecasts are primarily based on the U.S. Department of Labor, Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) and Producer Price Index (PPI) data. USDA, ERS typically releases its monthly update on the 25th of the month; however, if the 25th falls on a weekend or a holiday, the monthly update will be published earlier.

Consumer Price Index for Food (not seasonally adjusted)

The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, decreased 0.1 percent from November 2023 to December 2023 and was up 3.4 percent from December 2022. The CPI for all food increased 0.1 percent from November 2023 to December 2023, and food prices were 2.7 percent higher than in December 2022.

The level of food price inflation varies depending on whether the food was purchased for consumption at home or away from home:

• The food-at-home (grocery store or supermarket food purchases) CPI decreased 0.1 percent from November 2023 to December 2023 and was 1.3 percent higher than December 2022; and
• The food-away-from-home (restaurant purchases) CPI increased 0.3 percent in December 2023 and was 5.2 percent higher than December 2022.

In 2023, food prices increased by 5.8 percent. Food-at-home prices increased by 5.0 percent, while food-away-from-home prices increased by 7.1 percent. While prices increased in 2023 for all food categories tracked by the U.S. Department of Agriculture (USDA), Economic Research Service (ERS) except for pork, prices grew more slowly in 2023 than in 2022 for all categories. Fats and oils had the largest average price increase (9.0 percent) between 2022 and 2023, followed by sugar and sweets (8.7 percent), cereals and bakery products (8.4 percent), and processed fruits and vegetables (8.0 percent). Pork prices declined 1.2 percent in 2023, and several categories grew more slowly than their historical average rate, including fish and seafood (increased by 0.3 percent in 2023), fresh fruits (0.7 percent), fresh vegetables (0.9 percent), eggs (1.4 percent), and beef and veal (3.6 percent).

Food prices are expected to continue to decelerate in 2024. In 2024, all food prices are predicted to increase 1.3 percent, with a prediction interval of -1.4 to 4.2 percent. Food-at-home prices are predicted to decrease 0.4 percent, with a prediction interval of -4.5 to 4.0 percent, and food-away-from-home prices are predicted to increase 4.7 percent, with a prediction interval of 3.1 to 6.2 percent.

The USDA Food Price Outlook forecasting methods are based entirely on statistical models that are fitted to recent trends in the data. These methods provide prediction intervals that narrow over the forecast period as more data become available and the degree of uncertainty declines. Discussions of price changes focus on the midpoint of these forecast intervals (titled “Mid” in the workbooks) and use the lower and upper bounds of a 95-percent prediction interval—based on past data, the annual level of inflation is expected to fall in this interval 19 out of 20 times—to reflect the level of uncertainty (titled “Lower” and “Upper” in the workbooks, respectively).

The Food Price Outlook tracks and forecasts the annual percentage change in prices by averaging observed and forecast prices for all months in the current year compared to all months in the previous year. Following a year of high price growth like 2022, the annual percentage change in 2023 can be higher than recent year-over-year change (i.e., from December 2022 to December 2023) due to high within-year price growth in 2022. For example, although food-at-home prices were only 1.3 percent higher in December 2023 than in December 2022, food-at-home prices in January 2023 were 11.3 percent higher than January 2022, leading to an average increase of 5.0 percent across all months of the year. While price growth moderated substantially in 2023, which the recent year-over-year values reflect, the annual percentage change captures the annual change from all months in 2023 compared to 2022. For a summary of forecasting methods used in the Food Price Outlook, see ERS Refines Forecasting Methods in the Food Price Outlook.

Recent Historical Overview

Between the 1970s and early 2000s, food-at-home prices and food-away-from-home prices increased at similar rates. However, between 2009 and 2019, their growth rates diverged; while food-at-home prices deflated in 2016 and 2017, monthly food-away-from-home prices rose consistently. Differences between the costs of serving prepared food at restaurants and retailing food in supermarkets and grocery stores partly explain this difference.

In 2020, food-at-home prices increased 3.5 percent and food-away-from-home prices increased 3.4 percent. This convergence was largely driven by a rapid increase in food-at-home prices following the onset of the Coronavirus (COVID-19) pandemic, particularly for meats and poultry, while food-away-from-home price inflation remained similar to its 2019 inflation rate. In 2021, all food prices increased 3.9 percent as prices began accelerating in the second half of the year. No food categories tracked by USDA, ERS decreased in price in 2021 compared with their prices in 2020.

In 2022, food prices increased by 9.9 percent. Food-at-home prices increased by 11.4 percent, while food-away-from-home prices increased by 7.7 percent. All food price categories increased by more than 5 percent, and all food categories grew faster than their historical average rate. Following an outbreak of Highly Pathogenic Avian Influenza (HPAI), egg prices had the largest price increase (32.2 percent) between 2021 and 2022. Beef and veal prices increased the least (5.3 percent) between 2021 and 2022 and generally declined from peak prices in November 2021.

CPI Forecast Changes This Month

Year-over-year price increases continued to slow for all food, food at home, and food away from home. Food-at-home prices were 1.3 percent higher in December 2023 than in December 2022. Five food-at-home categories had lower prices in December 2023 than in December 2022: eggs, fresh vegetables, fish and seafood, dairy products, and other meats. In 2024, prices for most food categories are predicted to change at a rate below their 20-year historical average. Prices are predicted to increase for 10 food-at-home categories and decrease for 5 food-at-home categories in 2024, though the measures of uncertainty do not rule out either an increase or decrease in prices in 2024 for most categories.

Beef and veal prices were unchanged between November and December 2023 but remained 8.7 percent higher than December 2022. Beef and veal prices are predicted to increase 5.8 percent in 2024, with a prediction interval of -2.8 to 15.7 percent. Prices for beef and veal are predicted to experience the highest price growth of any category in 2024 as prices remain elevated following consistent growth in 2023.

Pork prices fell 1.4 percent in December 2023 due to weak demand and were up 0.1 percent from December 2022, essentially unchanged over the year. Pork prices are predicted to decrease 1.4 percent in 2024, with a prediction interval of -9.0 to 6.9 percent.

Retail egg prices increased 8.9 percent from November 2023 to December 2023 but were 23.8 percent below December 2022 prices. An outbreak of HPAI that began in 2022 contributed to elevated egg prices by reducing the U.S. egg-layer flock. After egg prices peaked in January 2023, they declined or stabilized through much of 2023. However, prices have increased again in recent months after HPAI was confirmed in egg layers in November 2023 for the first time since December 2022. The outbreak has affected about 4.5 million birds and 20 commercial flocks in the past 30 days ending January 24, 2024, and price impacts of the outbreak will be monitored closely. Egg prices are predicted to decrease 4.6 percent in 2024, with a prediction interval of -20.7 to 15.4 percent. This wide prediction interval reflects the volatility in retail egg prices.

Prices for fats and oils increased by 0.8 percent in December 2023 and were 2.3 percent higher than December 2022. Prices for fats and oils are predicted to increase 3.6 percent in 2024, with a prediction interval of -2.7 to 10.5 percent. Fats and oils is a category that had high within-year price growth in 2022, which contributes to the difference between its annual change in 2023 (9.0 percent) and its recent year-over-year trend.

Prices for fresh fruits and fresh vegetables both decreased 0.6 percent from November to December 2023. Prices for fresh fruits were 3.6 percent higher than those in December 2022, and prices for fresh vegetables were 4.8 percent lower than in December 2022. In 2024, prices for fresh fruits and vegetables are predicted to continue their slow growth from recent years relative to other categories. Prices for fresh fruits are predicted to increase 1.0 percent in 2024, with a prediction interval of -4.6 to 7.1 percent. Prices for fresh vegetables are predicted to decrease 0.9 percent in 2024, with a prediction interval of -6.7 to 5.3 percent.

Prices for cereals and bakery products declined by 0.7 percent in December 2023. Prices were 2.6 percent higher than December 2022, the lowest year-over-year increase since August 2021, partially due to higher grain production and lower prices for inputs, including fertilizer and eggs. Prices for cereals and bakery products are predicted to decrease 1.1 percent in 2024, with a prediction interval of -5.4 to 3.5 percent.

Producer Price Index for Food (not seasonally adjusted)

A Producer Price Index (PPI) resembles a CPI in that it reflects price changes over time. However, instead of retail prices, a PPI provides a measure of the average prices paid to domestic producers for their output. PPIs are reported for nearly every industry in the goods-producing sector of the economy. Three major PPI commodity groups are of interest to food markets: unprocessed foodstuffs and feedstuffs, processed foods and feeds, and finished consumer foods. These farm- and wholesale-level prices give a general sense of price movements across various stages of production in the U.S. food supply chain.

The PPIs are typically far more volatile than the downstream CPIs. Price volatility decreases as products move from the farm to the wholesale sector to the retail sector. Because of multiple processing stages in the U.S. food system, the CPI typically lags movements in the PPI. The PPI is thus a useful tool for understanding what may soon happen to the CPI.

USDA, ERS does not forecast industry-level PPIs for unprocessed, processed, and finished foods and feeds. However, these prices have historically shown a strong correlation with the all-food and food-at-home CPIs.

PPI Forecast Changes This Month

In 2023, prices increased for two categories tracked by USDA, ERS: farm-level cattle (22.0 percent) and wholesale beef (13.5 percent). Prices decreased for 11 categories, with the largest price declines for farm-level eggs (28.3 percent), farm-level wheat (23.1 percent), farm-level milk (19.5 percent), and wholesale poultry (18.4 percent).

In 2024, prices are predicted to increase for 3 PPI categories and to decrease for 10 categories, though their measures of uncertainty do not rule out either an increase or decrease in prices in 2024. Greater volatility in farm- and wholesale-level prices lead to wider prediction intervals for these products compared to retail-level products.

Prices are expected to moderate in 2024 for farm-level cattle and wholesale beef compared to their increases in 2023. Prices for farm-level cattle and wholesale beef declined by 3.3 percent and 0.5 percent, respectively, from November to December 2023. Farm-level cattle prices are predicted to decrease 2.8 percent in 2024, with a prediction interval of -17.4 to 14.6 percent. Prices for wholesale beef are predicted to increase 1.7 percent in 2024, with a prediction interval of -16.2 to 23.7 percent.

Prices for farm-level eggs fell by 14.4 percent in December 2023 after increasing by 58.8 percent in November. New cases of HPAI were confirmed in egg-layer flocks in November 2023 for the first time since December 2022. Prices in December 2023 were 64.8 percent lower than December 2022 following several months of large price decreases in early 2023. The effects of recent HPAI cases on farm-level egg prices will be closely monitored. Farm-level egg prices are predicted to decrease 6.7 percent in 2024, with a prediction interval of -55.6 to 111.7 percent. Egg prices are the most volatile category tracked by USDA, ERS, leading to a wide prediction interval.

Prices for farm-level wheat rose 2.4 percent in December 2023 but were 24.4 percent lower than December 2022. Wholesale wheat flour prices increased 1.7 percent in December 2023 but remained 9.0 percent below December 2022. Prices for farm-level wheat are predicted to decrease 13.2 percent in 2024, with a prediction interval of -34.6 to 15.6 percent, and wholesale wheat flour prices are predicted to decrease 2.8 percent in 2024, with a prediction interval of -14.9 to 11.0 percent.

For official USDA farm-level price forecasts, see World Agricultural Supply and Demand Estimates at a Glance. For additional information, detailed explanations, and analyses of farm-level prices, see USDA Economic Research Service Outlook publications including Livestock, Dairy, and Poultry, Oil Crops, Wheat, Fruit and Tree Nuts, and Vegetables and Pulses.

Source: USDA

Photo by Stephen Ausmus.