ERS now predicts the Consumer Price Index (CPI) for food-at-home prices to change between 0.5% and 0.5%, which they note is a "rate of inflation (or possibly deflation) that would again fall below the 20-year historical average of 2.5%."
Recent declines in prices for beef and veal, poultry, and eggs factored into the downward adjustment, ERS said. "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. A strong U.S. dollar makes U.S. goods less desirable, leaving more potential exports on the domestic market." Compared to the 2015 average price level, the 2016 level for CPI for food-at-home is down 1%.
Supermarket prices in 2017 are still forecast to rise between 1% and 2%, ERS noted, despite some downward revisions to components within the CPI for food at home. "Despite the expectation for declining prices in 2016, beef and veal, poultry, and dairy prices are expected to rise in 2017." ERS included their standard caveats on the outlook for 2017, noting it assumes normal weather and could be impacted by things such as the drought in California and the value of the US dollar could impact the outlook.
In adjusting price forecasts for pork and beef, the U.S. dollar is a common impact cited by USDA economists. However, they note that the "somewhat" weaker dollar will help improve both beef and pork exports, prompting increases in grocery store prices in 2017.
Recovery from the 2015 highly pathogenic avian influenza (HPAI) outbreak in the U.S. continues, heavily weighing on egg prices – a normally volatile food-price component. With the recovery continuing, ERS now sees egg prices down 19% to 18% in 2016 and to rise zero to 1% in 2017.
USDA adjusted forecasts downward for fats and oils prices in 2016 and 2017, noting while prices for peanut butter, butter, and margarine rose in August, prices for salad dressings decreased 1.2%. ERS predicts fats and oils prices to change between 0.5% and 0.5% in 2016 and to decrease 1% to zero percent in 2017.