Retail, foodservice food prices continue to diverge

Meatingplace, By Rita Jane Gabbett on 10/25/2017

USDA reported the food-away-from-home (restaurant purchases) consumer price index (CPI) rose 0.3 percent in September and is 2.4 percent higher than September 2016, while the food-at-home (grocery store items) CPI was up only 0.1 percent from August to September and is just 0.4 percent higher than last September.

Food-at-home prices and food-away-from-home prices have recently diverged. Restaurant prices have been rising consistently month over month due, in part, to differences in the cost structures of restaurants compared to supermarkets and grocery stores. Prices at food-at-home outlets have posted lower year-over-year price increases. Restaurant prices primarily comprise labor and rental costs with only a small portion going toward food. For this reason, decreasing farm-level and wholesale food prices have had less of an impact on restaurant menu prices.

In September, pork prices rose 0.4 percent from the previous month, and prices are 2.3 percent higher than in September 2016. Despite declining ham and pork chop prices, bacon prices increased 1.5 percent in September. Lower beef prices are most likely adding pressure to lower pork prices, according to USDA.

Although USDA forecasts a 4.9-percent increase in pork production in 2017, strong consumer demand for pork (particularly for cuts such as bacon) will likely hold retail prices flat to 1.0 percent above 2016 levels and increase pork prices an additional 0.75 to 1.75 percent in 2018, USDA predicted.

Prices for poultry fell 0.2 percent from August to September but are 0.2 percent higher than last year. Despite high broiler production, many broilers have low weights, which, along with larger birds demanding higher prices, has contributed to higher retail poultry prices.

While poultry prices are expected to increase at the retail level, price increases are still expected to be lower than the 20-year historical average of 2.1 percent. USDA predicted prices to be flat to up 1.0 percent in 2017 and to increase an additional 0.25 to 1.25 percent in 2018.