U.S. food price inflation is still forecast at 1 percent to 2 percent for 2017 compared to 2016, with grocery store seen holding steady to up 1 percent and restaurant prices moving up 2 percent to 3 percent, according to the monthly Food Price Outlook update.
The forecast for food at home (grocery store) prices holding steady to rising 1 percent reflects “an assumption of normal weather conditions throughout the remainder of the year; however, severe weather or other unforeseen events could potentially drive up food prices beyond the current forecasts. In particular, drought conditions throughout the US could have large and lasting effects on fruit, vegetable, dairy, and egg prices.” As they have previously noted, a rise in the US dollar “could continue to make the sale of domestic food products overseas more difficult. This would increase the supply of foods on the domestic market, placing downward pressure on retail food prices.”
USDA did make several changes to price forecasts for several products, lowering the outlook for poultry and eggs and fresh fruit and vegetables.
Poultry: Prices now seen rising 1 percent to 2 percent compared to 1.5 percent to 2.5 percent in February. Retail chicken price inflation has remained relatively low in 2017 partly due to an increase in broiler production, with a strong US dollar resulting in “more chicken broilers remaining in the US market which, in turn, places downward pressure on retail chicken prices.”
Eggs: Prices now seen down 5 percent to 6 percent from 2016, a steeper decline than they forecast in February, but still well below the decline of 21.1 percent that was seen in 2016.
Fresh fruits and vegetables: Prices are now forecast to be essentially flat – up 0.5 percent to down 0.5 percent compared to an outlook for an increase of up to 1 percent in February. Further, prices for fresh fruits are now seen steady to up 1 percent compared to an outlook in February that they would rise 0.5 percent to 1.5 percent. “Factors, such as a stronger U.S. dollar and low oil prices, have mitigated the effect of the drought on retail fresh produce prices throughout 2016,” USDA said.
Cereals and baking products: Prices are now seen rising between 0.5 percent and 1.5 percent versus the month-ago outlook for a steady to up 1 percent outlook. USDA chalked the expectation for a bigger rise in prices to be due to “an increase in farm-level wheat prices and a decreased forecast of wheat imports.”
Comments: The shifts in USDA’s price forecasts still have some important caveats attached to them, primarily the value of the US dollar. But, 2017 crop results will also loom large in the picture with acreage the first focal point, a question that will be at least partially answered in the March 31 USDA Prospective Plantings report.
