Could Food Prices Ease in 2023? USDA's New Consumer Food Price Forecast Has a Bit of Good News
USDA raised its consumer food price forecast again, to 8.5% to 9.5% for 2022. The agency had initially predicted a 2% to 3% rise in the prices consumers pay for food this year and in February started lifting that outlook. Eggs, fats and oils, and poultry prices are making the biggest gains.
In its first forecast for 2023, USDA sees inflation retracting to a 2.5%-3.5% range. The 20-year historical average for consumer food prices is a 2.4% rise.
Breakdown of Food Prices in Latest USDA Forecast
The Consumer Price Index (CPI) for all food in 2022 at up 8.5% to 9.5% from 2021 is the highest rate of overall food price inflation since 1979, which saw prices rise 11%.
The biggest increase is for the fats and oils category, which is hiked to a 16.5%-17.5% range from a 14%-15% range. Other categories with big increases are poultry, dairy and cereals/bakery.
For food at home (grocery) prices, USDA now sees them rising 10% to 11%, the biggest rise since prices surged 10.8% in 1979.
Food away from home (restaurant) prices are expected to increase 6.5% to 7.5%, the biggest increase since the 9% hike in 1981.
This is the sixth consecutive set of monthly increases in forecasts for all food and grocery store prices, the first time that has happened based on monthly data from USDA dating back to 2003. USDA’s forecasts for restaurant prices have risen every month since January except for April and June.
Which Commodities Are Driving the Increase?
For individual commodities or commodity groups, the July outlook was revised upward for 10 food categories and four aggregate categories versus forecast levels from June. Several saw no change.
Prices for eight food categories increased by at least 1%: food at home, other meats, poultry, dairy products, fats and oils, processed fruits and vegetables, sugar and sweets, cereals and bakery products, and other foods. Three of those categories were up 2%: other foods, cereals and bakery products, and fats and oils.
Annualized increases were seen in June for all food categories and in June with the smallest being for beef and veal at 4.1%. Double-digit increases were registered for all grocery store prices (12.1%) with the biggest percentage increase coming in eggs at 33.1%.
Impact of Avian Influenza Outbreak
The big rise in egg prices was due to the highly pathogenic avian influenza outbreak. “This outbreak has contributed to elevated egg prices and increasing poultry prices as over 40 million birds in 37 states have been affected” USDA said.
Supply chain issues were also cited as factors for some of the food price increases. “Economy-wide factors including ongoing supply chain issues and higher energy, transportation, and labor costs, contributed to increases in prices across food categories,” USDA said.
Outlook for 2023
As for 2023, this is the first outlook for food price inflation for the coming year. In 2023, food-at-home prices are forecast to rise between 2.0% and 3% with food-away-from-home prices predicted to increase between 3% and 4%. Overall food price inflation is forecast up from 2.5% to 3.5%. The 20-year average increase in food prices is 2.4% for all food prices, 2.9% for restaurant prices and 2% for grocery store prices.
Some industry contacts say USDA’s initial forecasts for 2023 appear too low.
Meanwhile, USDA’s own forecasting methodology is changing. “The Food Price Outlook forecasting methodology is being revised and will result in a revised data series,” USDA said. “A report describing the changes to the methodology is forthcoming and will be released before changes to the data series become effective.
