April 25/Washington/ U.S. Department of Agriculture -- In 2011, the Consumer Price Index (CPI) for all food is projected to increase 3-4%. Food-at-home (grocery store) prices are forecast to rise 33.5-4.5%, while food-away-from-home (restaurant) prices are forecast to increase 3-4%. Although food price inflation was relatively weak for most of 2009 and 2010, cost pressures on wholesale and retail food prices due to higher food commodity and energy prices, along with strengthening global food demand, have pushed inflation projections for 2011 upward.

The all-food CPI increased 0.8% between 2009 and 2010, the lowest food inflation rate since 1962. Food-at-home prices increased by 0.3%--the lowest annual increase since 1967- -with cereal and bakery product prices declining 0.8%, and processed fruit and vegetable prices dropping 1.3%. Food- away-from-home prices rose 1.3% in 2010, the lowest annual increase for restaurant prices since 1955.

The CPI for all food increased 0.7% from February to March 2011, increased 0.4% from January to February 2011, and is now 2.9% above the March 2010 level. The food-at- home CPI increased 1% in March 2011 and is up 3.6% from last March, while the food-away-from-home index was up 0.3% in March 2011 and is 1.9% above last March. Food commodity and energy price increases over the past 9 months have caused recent increases in grocery store prices, resulting in ERS raising its food-at-home inflation forecast to 3.5-4.5% for 2011. The all-items CPI was up 1% in March, mostly due to higher food and energy prices, and is 2.7% above the March 2010 level.

Beef prices increased 2.3% in March and are 12.2% above last March, with steak prices up 11% and ground beef prices up 13.6%. Pork prices increased 2.3% in March and are 11.2% above last March’s level. Poultry prices were unchanged in March and are 2.2% above prices last year at this time, with chicken prices up 1.6% and other poultry prices (including turkey) up 4.7%. As commodity prices and input costs have risen over the past nine months, beef and pork prices are now significantly higher than in 2010. Increased inflation for beef and pork products is expected for most of 2011, as reflected in ERS’s forecasts--beef prices are now projected to increase 7-8% and pork prices 6.5-7.5% in 2011.

Egg prices decreased 0.2% in March 2011 (the third consecutive monthly decline), so egg prices are now just 1% above the March 2010 level.

Dairy prices were up 1.3% in March and are 3.7% above the March 2010 level. Within the dairy category, prices changed as follows in March: milk prices were up 3.4% and are 6.8% above last March’s prices; cheese prices were up 1% and are 1.9% above last March’s level; ice cream and related product prices were down 1.5% but are 4.2% above last March’s level; and butter prices increased 1.7% this month and are 31.9% above last March. In 2010, dairy prices were up only 1.1% from 2009 (following a 6.4% decline from 2008 to 2009). However, higher projected prices for farm milk in 2011 will lead to increases of 4.5-5.5% for retail dairy product prices in 2011 based on current ERS forecasts.

Fresh fruit prices decreased a mostly seasonal 1.3% in March. The fresh fruit index is down 1.5% overall from last year at this time, with apple prices up 2.3%, banana prices up 6.3%, citrus fruit prices up 8.5%, and other fresh fruit prices down 8.2%. Fresh fruit prices fell in seven of the past 14 months, leading to an overall fresh fruit price decline of 0.6% in 2010. However, current forecasts predict some price inflation for fruit prices in 2011. The fresh vegetable index increased 4.2% in March. Since last year at this time, fresh vegetable prices are up 9.8%, with potato prices up 12.1%, lettuce prices up 27.3%, tomato prices up 10.6%, and other fresh vegetable prices up 5%. Processed fruit and vegetable prices increased 0.3% in March (the seventh monthly increase in the past 14 months) and are 1.2% above the March 2010 level.

Cereal and bakery product prices were up 0.5% from February to March 2011 and are up 1.8% from last year at this time, with bread prices up 2.7% and breakfast cereal prices up 2.1% over the past year. Although cereal and bakery product prices declined 0.8% overall in 2010, higher wheat commodity costs should begin to affect cereal and bakery product prices over the next few months, causing prices to rise 3.5-4.5% overall in 2011. Sugar and sweets prices were up 0.7% in March and are 2.8% above last March. Within the nonalcoholic beverages category, prices changed as follows in March: carbonated drink prices were up 1.1% and are up 1% from March 2010; coffee prices were up 3.9% and are up 9.4% from last March; and non-frozen noncarbonated juices and drinks prices were down 0.1% in March and are unchanged from the March 2010 level.

From the April 26, 2011, Prepared Foods' Daily News.