If you’ve been doing any grocery shopping lately, you know that the cost of many basic food items has increased since what seemed like some stiff increases in 2020. The U.S. Department of Agriculture says it may take several more months before prices return to more normal trends.
Last year, COVID-19 related disruptions drove prices for food purchased at grocery stores to an unusually high 3.5% increase. For 2021, the increases on many of those same food items will be between 2-3% overall, but USDA Economist Carolyn Chelius recently bumped up the projected price forecasts for meats by 1% in the department’s latest Food Price Outlook.
“We’re predicting beef and veal prices will increase 3-4% and pork prices 4-5%.” Poultry prices are expected to increase 2.5-3.5%. Fish and seafood prices are now predicted to increase between 2-3%. Chelius says fresh fruits are leading the list of this year's retail price hikes and are now predicted to increase between 5-6% in 2021.
“Meats only make up about 22% of food at home prices and although prices have increased a fair amount over the course of 2021 so far and they will drive the price of food at home, there are other categories that haven’t increased that much so far this year such as cereals and bakery products,” Chelius said on USDA’s Newsline.
Of course, that doesn’t mean that farmers are reaping in huge rewards from the retail food dollar. On average, U.S. farmers received 14.3 cents for farm commodity sales from each dollar spent on domestically produced food in 2019, up from a revised estimate of 14.2 cents in 2018. Known as the farm share, this amount increased slightly after 7 consecutive years of decline, according to USDA.
There are several variables at play. First of all, the level of food price inflation varies depending on whether the food was purchased for consumption away from home or at home.
In 2021, food-at-home prices are expected to increase between 2-3%, and food-away-from-home prices are expected to increase between 3-4%. In 2022, food-at-home prices are expected to increase between 1.5-2.5% and food-away-from-home prices are expected to increase between 3-4%.
Between the 1970s and early 2000s, food-at-home prices and food-away-from-home prices increased at similar rates, USDA notes. “Since 2009, however, their rates of growth have diverged; while food-at-home prices deflated in 2016 and 2017, monthly food-away-from-home prices have been rising consistently since then.” The divergence is partly due to differences between the costs of serving prepared food at restaurants and retailing foods in supermarkets and grocery stores.
In 2019, retail food-at-home prices rose 0.9%. This increase was the second in 4 years, but the rate was still below the 20-year annual average of 2%. While prices for poultry, eggs, fats and oils, and fresh fruits declined in 2019, prices for all other food categories increased. Fresh vegetables had the largest annual average increase of 3.8% in 2019 and eggs the largest annual average decrease of 10%.
In 2020, food-at-home prices increased 3.5% and food-away-from-home prices 3.4%. This convergence was largely driven by a rapid increase in food-at-home prices while food-away-from-home price inflation remained within 0.2 percentage points of the 2019 inflation rate. The largest price increases were for meat categories: beef and veal prices increased by 9.6%, pork prices by 6.3%, and poultry prices by 5.6%. The only category to decrease in price in 2020 was fresh fruits, by 0.8%
USDA says prices this year have been driven up by strong domestic and international demand, high feed costs, and supply chain disruptions. Winter storms and drought impacted meat prices this spring, and processing facility closures due to cybersecurity attacks impacted beef and other meat production in May.
In addition, Chelius notes that economy-wide inflation is also high and contributing to overall price increases. The Consumer Price Index for “all-items,” which encompasses food, housing, transportation, and other categories, has increased 2.9% so far in 2021 compared to 2020. “For context, annual all-items inflation has averaged 2% over the past 20 years. Inflation in 2021 is already nearly 50% higher than average annual inflation only halfway through the year. Above-average inflation is expected to continue through 2022,” the agency noted.
Wyant is president and founder of Agri-Pulse Communications Inc. For more news, go to www.Agri-Pulse.com.