Americans this year will see the smallest overall rise in supermarket prices since 2010, a barely noticeable 0.5 percent, said the Agriculture Department in lowering its forecast of food-at-home prices for the fifth month in a row. Food prices are forecast by USDA to rise by 1.5 percent at the supermarket next year on the back of higher meat and dairy prices in the new year.
Grocery prices usually rise by an average 2.5 percent a year; the lowest rate in recent years was 0.3 percent in 2010. Early this year, USDA estimated grocery prices would rise by the historical average this year. In March, it began whittling down the estimate and reduced it in each following month.
“The forecast has been lowered due to recent declines in prices for beef and veal, poultry, and eggs. Lower transportation costs due to deflated oil prices as well as the strength of the U.S. dollar have placed additional downward pressure on food prices in the first half of 2016, resulting in more goods on the U.S. market at a lower price,” said USDA in its monthly Food Price Outlook.
Beef and veal prices are nearly 8 percent lower than a year ago and broiler chickens are 3.4 percent lower than than in mid-2016, said USDA. Lower export volumes for beef and poultry have meant more meat is available for domestic sale and helped to hold down prices. USDA expects beef prices to fall by 4.5 percent, a dramatic change from the 12 percent increase of 2014, when meat prices set records. Pork prices are forecast to drop by 1 percent and poultry by 1.5 percent for the year. All three meats are forecast to rise slightly in price in 2017.
Egg prices, which soared last summer after bird flu killed 10 percent of U.S. egg-laying hens, are down by 29 percent since last July as flocks are being rebuilt this year. Prices are expected to stabilize in 2017.
Prices for dairy products are expected to fall for the second year in a row due to smaller exports that result in larger domestic stocks. Dairy prices are in a slump worldwide. U.S. supermarket prices fell by 1.3 percent last year and are estimated to drop by 1 percent this year before rising by 2 percent in 2017. Said USDA, “Dairy imports have recently declined from very high levels in the first quarter of 2016, and domestic demand for dairy is expected to be high. This could result in dairy prices beginning to rise in the second half of 2016.”
Americans spend nearly 59 cents of the food dollar on groceries, with the remaining 41 cents spent on food at restaurants, fast-food outlets and carry-out counters. USDA forecasts overall food inflation of 1.5 percent this year. Like food-at-home, it would be the smallest increase since 2010’s 0.8 percent. The average annual increase is 2.6 percent.