USDA expects slowing food inflation - The Packer

USDA expects slowing food inflation

11/14/2011 03:37:00 PM
Tom Karst

U.S. Department of Agriculture economists believe food inflation will slow in 2012, according to the agency’s latest price forecasts.

“The overall story is that food prices are projected to continue to increase through 2012, just at a slower rate than what we have seen this year,” said Richard Volpe, economist with the USDA’s Economic Research Service.

Looking at the big picture for food prices, the USDA expects food consumed at home to increase 4% to 5% this year and climb 3% to 4% in 2012. Meanwhile, food consumed away from home is expected to show more modest increases, with inflation projected at 3% to 4% in 2011 and 2% to 3% in 2012.

Rising commodity costs and fuel prices increases tend to hit food consumed at home more than away from home food, Volpe said.

“Food away from home is subject to more advertising, more transportation, generally more inputs that will dampen the effect of input cost increases,” Volpe said Nov. 8.

Volpe said as food prices rise, consumers tend to eat more food at home in an effort to save money. That, in turn, makes foodservice operations less willing to raise prices and risk losing even more customers.

The USDA report shows an inflation forecast for fresh vegetables at 4.5% to 5.5% this year, followed by expected inflation of 3.5% to 4.5% in 2012. USDA economists forecast fresh fruit inflation at 3% to 4% for 2011 and another 3% to 4% inflation expectation for next year.

The USDA said fresh fruit prices increased 1.8% in September, with the fresh fruit index is up 8.7% from last year at this time. Apple prices were up 14.6%, banana prices up 6% and citrus nearly 10% higher.

“Record-high farm prices for the month of August, combined with late harvesting of many fruit crops, have led ERS to revise its 2011 forecast for fresh fruits upward to 3% to 4%,” the agency forecast said.

Meanwhile, the USDA said the fresh vegetable index increased 1.4% in September. Year-to-date vegetable retail prices are up 6.5% over the same time last year.

Potato prices have led the way with a 16.2% gain, followed by 7.1% increase for lettuce and 4.6% for tomatoes.



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