USDA Lowers Forecast 2013 Food Price Increase

December 24, 2013 01:14 AM

via a special arrangement with Informa Economics, Inc.

Makes no shifts to the outlook for 2014 food price inflation

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

U.S. food price inflation for 2013 is now forecast at 1.25 percent to 1.75 percent, down from the prior outlook for prices to rise 1.5 percent to 2.5 percent, according to USDA’s Economic Research Service (ERS).

The forecasts: "Based on current conditions, ERS's 2013 inflation forecast predicts increases of 1.25 to 1.75 percent for all food prices, with food-at-home prices predicted to increase 0.75 to 1.25 percent," ERS detailed. "This means that prices are likely to increase less than they did in 2012 and that annual inflation should be lower than the 20-year historical average of 2.8 percent."

The increase in food-at-home prices is now on track to be the fourth-lowest annual increase since at least 1980, according to the agency.

As they have noted previously, the impact of the 2012 drought "has been less than initially forecast. The inflationary pressure of the drought has been offset by factors such as decreased exports and increased imports of many US agricultural products, a stronger US dollar, low energy price inflation, and decreased prices for many commodities unaffected by the drought."

As for 2014, ERS is maintaining their forecast for a 2.5 percent to 3.5 percent increase in all food prices, a more normal level of increase from a historical perspective "Inflationary pressures are expected to be moderate, given the outlook for commodity prices, animal inventories, and ongoing export trends," ERS said. "Retailer margins, having contracted since the drought, may expand in 2014 given moderate input prices, which should contribute to inflation."

Specifically, ERS now expects the food-at-home and food-away-from home prices to increase 2.5 percent to 3.5 percent from 2013 levels. "This forecast is based on an assumption of normal weather conditions; however, a resurgence of the drought in key agricultural areas or other severe weather events could potentially drive up food prices beyond the current forecasts," ERS noted.

On a monthly basis, the CPI for all food decreased 0.1 percent from October to November, increased 0.1 percent from September to October, and is now 1.2 percent above the November 2012 level. The food-at-home (grocery store food items) CPI was down 0.3 percent in November and is up 0.6 percent from last November. The food-at-home CPI has fallen slightly throughout 2013 and is down 0.25 percent since January


Comments: The decline in the 2013 food price forecast is of note since it continues to indicate the major drought which reduced US crop output in 2012 did not translate into higher food prices as ERS had initially thought. This marks the first adjustment to the 2013 food price outlook since the agency lowered the forecast in July to the level they carried until this month – 1.5 percent to 2.5 percent.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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