In its latest monthly forecast, the USDA said the Consumer Price Index (CPI) for all food – that eaten at home and away from home – is on track to rise 3.5 to 4.5 percent during 2011, up from the 3 to 4 percent that it had been predicting since February.
The USDA had been saying since mid-2010 that food price inflation would accelerate during 2011. Its initial prediction was that prices would rise by 2 to 3 percent, after the CPI had dropped to its lowest rate since 1962, rising only 0.8 percent over the past two years.
For 2012, the USDA has forecast that inflation will slow, but predicts the CPI will rise a further 2.5 to 3.5 percent on 2011 levels.
“Price levels in 2012 will hinge significantly on several macroeconomic factors such as weather conditions, fuel prices, and the value of the US dollar,” the USDA said.
Although the department said retailers had been slow to pass on cost increases, many major food manufacturers have said they intend to raise prices to improve margins against increased commodity costs.
Flooding followed by high temperatures in the Midwest, poor weather in Argentina and Russia, and higher fuel costs have all contributed to an increase in prices of the three key US grain commodities, corn, wheat and soybeans, causing diminishing stocks amid growing demand.
The current CPI is 4.7 percent above the September 2010 level, USDA said, and most of that rise is due to higher prices at the grocery store, rather than restaurant prices. The food-at-home CPI is up 6.3 percent from last September, while the food-away-from-home index is 2.6 percent above last September, the department said.
Prices of beef, pork, eggs, potatoes and fats and oils were all at particularly high levels compared to a year ago, beef up 10.1%, pork 7.5%, eggs 11.1%, potatoes 16.2% and fats and oils 11.3%.