Compared to food price inflation of 11 percent in 2022, grocery price increases will be virtually nonexistent this year, said a Wells Fargo analyst Wednesday during a panel discussion on the 2024 outlook for the food and ag sector. A Rabobank analyst said that softer commodity prices would take the steam out of the hot farmland market.
“Consumers are going to be very happy” with low inflation in the food sector, said Michael Swanson, chief ag economist at Wells Fargo’s Agri-Food Institute, to the North American Agricultural Journalists. Food makers will face “backwards pressure” on prices from retailers and food service operators.
Grocery inflation at the start of this year would be 1 percent or slightly higher but trend downward to zero or into negative territory by the end of the year, he said. For the restaurant, fast-food, and cafeteria sectors, lumped together as food away from home, “we’re still closer to 6 percent right now,” said Swanson. Americans love to eat out, he said, but consumers are showing resistance to high menu prices. “It’s going to be interesting to see who wants to eat where.”
According to the Consumer Price Index, food inflation was 2.9 percent at the end of 2023. USDA economists forecast that grocery prices this year will be, on average, 0.6 percent lower than in 2023 and that the food-away-from-home inflation rate will be 4.9 percent.
Farmland prices have boomed this decade, thanks to strong commodity prices and the three best years on record for farm income, but they’re likely to flatten in the near term, said Roland Fumasi, the head of RaboResearch Food and Agribusiness. Land values accelerate during periods of high commodity prices and slacken when prices moderate. Agricultural economists in the private and government sectors anticipated somewhat lower commodity prices in coming years.
“Given the pullback that we’ve seen in crop prices, we’re probably going to take a little breather, and we’re not going to keep going up at these fast paces in terms of land values, like we have for the last few years,” said Fumasi. Land values might rise or fall by 1 or 2 percent in a year, he said, “but I think any change is going to be pretty muted.”
Agricultural land values in the Midwest rose 5 percent during 2023, the smallest gain in three years, said the Chicago Federal Reserve Bank in November. The Kansas City Fed said that while the national agricultural economy softened last fall, farm real estate values “held firm with ongoing support from a strong agricultural economy in recent years.”
In a list of key issues for the agricultural economy, Dan Sumner, an economist at the University of California-Davis, put China first. “We’ve got trouble with growth in China,” he said, with possible direct impact on U.S. agriculture, because China is the No. 1 market for U.S. food and ag exports.