Last week USDA's Economic Research Service issued its report on food prices with a look at key inflation numbers. The agency reports that in 2013, food prices for "food-at-home" was up just 0.6% from a year ago. And "food-away-from-home" was up 2.1% from the same period a year ago.
In reviewing prices, the agency notes that despite the historic drought of 2012, and dire predictions for food prices, that "retail food prices were mostly flat in 2012. Prices rose for beef and veal, poultry, fruit and other foods in 2012; however, prices fell for pork, eggs, vegetables, and nonalcoholic beverages. For the remaining food categories prices were mostly unchanged."
There was some late 2012-early 2013 impact on prices as corn and soybean costs rose, but based on current inflation numbers, the 2013 forecast predicts a food price increase of just 1.25 to 1.75% for all food prices. The report notes "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%."
However, the look ahead into 2014 shows a return to normal. ERS forecasts that food price inflation next year will "return to a range closer to the historical norm. Inflationary pressures are expected to be moderate, given the outlook for commodity prices, animal inventories and ongoing export trends."
The USDA agency notes that retailer margins contracted since the drought of 2012, but that could change in 2014, contributing to inflation. The food, food-at-home and food-away-from-home consumer price indices are expected to increase 2.5 to 3.5% over 2013 levels.
The agency notes that the 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 current forecasts," the agency cautions.