USDA forecasts for consumer food price inflation were increased again this month, with all food prices now seen rising 5% to 6% (4.5% to 5.5% in March) and grocery store prices expected to rise 5% to 6% (4.5% to 5.5% in March) while the forecast increase in restaurant prices was held at 5.5% to 6.5%.
Taking the midpoint of USDA’s forecast ranges, all food price inflation would be the highest since it was 5.5% in 2008 with food at home (grocery store) inflation also the highest since 2008 when it was up 6.5% from the prior year. The 20-year average for food price increases at 2.4% for all food, 2.9% for restaurant prices and 2.0% for grocery store prices means the current outlooks are for costs that are at least double those averages.
Changes versus Month-Ago Levels
The Consumer Price Index (CPI) for all food increased 1% from February 2022 to March 2022, and food prices were 8.8% higher than in March 2021. The food-away-from-home (restaurant purchases) CPI was 6.9% higher than March 2021 while food at home (grocery store) prices were 10% higher than one year ago in March. Factors causing the increased food price inflation, according to USDA, will be upward price pressures from the Ukraine conflict but downward price pressure from recent increases in interest rates by the Fed. “The situations will be closely monitored to assess the net impacts of the concurrent events on food prices as they unfold,” USDA said.
Confirmation of highly pathogenic avian influenza (HPAI) in the US since earlier this year has had an impact—albeit modest—on egg prices, according to USDA. “Egg prices increased by 1.9% in March 2022, following a 2.2% increase in February,” USDA detailed. “An ongoing outbreak of highly pathogenic avian influenza could contribute to poultry and egg price increases through decreased supply or prices could be reduced by a drop in international demand for U.S. poultry.” USDA now sees egg prices rising 6% to 7% in 2022 versus 2021, a big jump from their month-ago outlook that egg prices would be up 2.5% to 3.5%. USDA initially expected 2022 egg prices to be down 0.5% to up 0.5%.
Meat, Other Price Increases
While wholesale beef prices decreased by 3.6% in March 2022, USDA noted retail beef prices increased by 1%. “Wholesale pork prices, along with port congestion, contributed to a 1.4% increase in retail pork prices in March 2022,” USDA said. Their outlook is for beef and veal prices to rise between 6% and 7% in 2022 (3% to 4% prior), with pork prices seen rising 4% to 5% (3% to 4% prior) and other meat prices are expected up 3.5% to 4.5% (2.5% to 3.5% prior). USDA initially expected beef and veal and pork prices to be up 2% to 3% in 2022. Retail poultry prices are seen up 7.5% to 8.5% in 2022 (6% to 7% prior) in part as cold storage data indicates historically low stocks of frozen poultry. USDA initially expected poultry prices up 1% to 2% in 2022. Fats and oils prices are predicted to increase between 8% and 9% in 2022, up from their prior expectation those prices would increase 6% to 7%. Those prices were expected to be up 1.5% to 2.5% in USDA’s initial outlook. Dairy prices are now seen up 6% to 7% in 2022 compared with 2021, up from 4% to 5% in March. USDA started its 2022 expectations for dairy product prices to be down 0.5% to up 0.5%.
More Food Price Forecast Hikes Ahead
Given that food price inflation on a monthly and annual basis has not eased, look for USDA to continue increasing their forecasts ahead. In 2008, the last time food price inflation was as high as the midpoint of the current outlook, USDA increased their forecasts each month in March, April and May, with a final increase in August. Similarly, their outlook for grocery store prices increased in March, May and August.
For 2022, USDA has already increased its forecast for all food price inflation in February, March and April, after starting from a level of 2% to 3% in July 2021. For grocery store prices, the current 5% to 6% increase is from increases in February, March and April after the agency initially expected grocery store prices to increase just 1.5% to 2.5%.
For restaurant prices, USDA’s 5% to 6% forecast is up from an initial expectation for increases to be 3% to 4%, with the forecast range rising in January, February and March.
History suggests USDA may arrive at its final outlooks for all food and food at home prices in August. But that would depend on food price inflation data not continuing to build as we move through the balance of 2022. Typically, USDA’s forecasts for all food and grocery store prices stay steady in September-December. Restaurant prices, however, are subject to later upward revisions with the final increase coming in November or December.