Retail prices for fresh fruit will rise slightly in 2017 but fresh vegetable prices are expected to decline, a new U.S. Department of Agriculture report predicts.

In the January Food Price Outlook, the USDA Economic Research Service said fresh fruit prices are forecast to increase by 1% to 2% in 2017 after rising 2.2% in 2016.

Retail prices for fresh vegetables were flat in 2016 compared with 2015, and the USDA predicts fresh vegetable prices to decline between 3% and 4% in 2017,

The USDA said at retail prices for all food-at-home declined 1.3% in 2016. Led by price drops in eggs, beef, pork and dairy, the decline was the first annual decline in supermarket prices since 1967, according to the USDA. For 2017, the USDA estimates that supermarket prices for all food are expected to rise from zero to 1%.

Below average

Both fresh fruit and fresh vegetable predictions fall below historical averages for retail price changes.

The 20-year historical average for retail inflation is 2.2% for fresh fruit and 2.8% for fresh vegetables, said Annemarie Kuhns, economist with the USDA.

The forecast model takes into account prices at the farm and wholesale level, and Kuhns said those prices have reflected lower fresh vegetable prices. December farm level prices were down 28.2% compared with December 2015, she said.

"What we typically see pricing at the farm and wholesale level trickles to the retail level in one two months," she said.

A stronger dollar and lower oil prices have offset the effect of the drought in California in 2016, the USDA said. A stronger dollar makes imports cheaper and U.S. exports more expensive, keeping more fruits and vegetables in the domestic market.

The USDA said farm-level fruit prices increased 11.6% in 2016 but are expected to decrease 7% to 8% in 2017. Farm-level vegetable rose 0.9% in 2016 but are forecast to decline 9% to 10% in 2017.

Kuhns said the USDA will update its food price forecast every month.