Food prices could fall slightly in 2012, says USDA

By Caroline Scott-Thomas

- Last updated on GMT

Food prices could fall slightly in 2012, says USDA

Related tags Percent Inflation Consumer price index

Food prices are likely to fall slightly from 2011 levels next year, the US Department of Agriculture (USDA) has said in its first food price index outlook for 2012.

US food prices have risen at a higher than forecast rate during 2011, with the Consumer Price Index (CPI) for all food – that eaten at home and away from home – projected to rise 3 to 4 percent during the year. And several major food manufacturers said they intended to raise prices on the back of stronger commodity costs.

In 2012, the USDA said it expects the CPI for all food to rise 2.5 to 3.5 percent.

Nevertheless, the department also noted that the CPI inflation for food in 2010 was at its lowest level since 1962, rising only 0.8 percent over a two year period, despite volatility in food commodity markets.

“While many inflationary pressures that drove prices up in 2011 are not expected to intensify and may even decrease in 2012, retailers have been slow to pass on cost increases to date,”​ the USDA said. “Price levels in 2012 will hinge significantly on weather conditions in the American Midwest during the remainder of July and into August and September 2011.”

The CPI for all food is now 3.7 percent above the June 2010 level, the USDA said, with the food-at-home CPI up 4.7 percent since last June, and the food-away-from-home index up 2.3 percent.

“Food commodity and energy price increases over the past year, combined with a weak US dollar, have caused most of the recent increases in grocery store prices,”​ it said.

Although rising food prices undoubtedly impact Americans, particularly in the current economic climate, recent USDA figures show that US household expenditure on food as a share of disposable income has hit an all-time low, falling to just 9.4 percent last year. This is down from 11.4 percent in 1990 and 13.2 percent in 1980.

In addition, market research organization the Nielsen Company points out that food accounts for a much smaller proportion of total household spending in the United States than it does elsewhere. Food spending accounts for about 11 percent of the average Austrian household’s expenditure, 15 percent in South Korea, and 45 percent in Pakistan. Per capita, that translates as $2,208 in the United States, $2,860 in Austria, but just $309 in Pakistan, the market researcher said.

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