USDA-ERS projects more modest retail food prices in 2021 after last year’s market volatility
Disruptions caused by the COVID-19 pandemic during 2020 were vast and destructive.
Some of the most notable pandemic-related disruptions took place in the agricultural and food markets where slaughter plants shut down, inventory backed up, prices skyrocketed and consumers begin avoiding restaurants, instead flocking to grocery stores to fill their pantries and freezers, all while leaving shelves empty and many without essential supplies.
Because of this, the retail food market saw almost unprecedented volatility during the year 2020.
In fact, during the third week of March, consumer spending at grocery stores skyrocketed 68 percent above numbers from the first few months of the year. The spike in demand caused increased prices, and from March to April, retail grocery prices rose 2.6 percent – the largest monthly change in the food-at-home consumer-price index since inflation in the 1970s, according to the U.S. Bureau of Labor Statistics (BLS).
Overall U.S. price increase
Despite the quick uphill climb seen by food prices during the first half of 2020, BLS shows many product prices have begun to come back down, although retail food prices in general are still significantly greater than the same time last year.
According to the most recent data available from BLS released in October, grocery prices were four percent greater than in October 2019, and despite stay-at-home orders and restaurant restrictions, the price of food away from home was 3.9 percent higher in October 2020 than the year prior.
“This year-over-year change is greater than has been observed in the last decade,” notes Jayson Lusk, head of the Department of Agricultural Economics at Perdue University. “From 2000 to 2019, the average annual change in retail grocery prices was about 1.9 percent. Throughout much of 2015 and 2016, retail grocery prices actually decreased relative to the year prior.”
Lusk notes fluctuations in meat, dairy and egg prices have been the biggest drivers of the overall price hike in the U.S.
“In June, prices of those products at grocery stores were 12.8 percent more than the same time in 2019. As of October, prices of those products were still running 6.1 percent more than in 2019,” he says.
“Price increases are not only limited to meat and animal products,” Lusk continues. “Cereal and bakery-product prices were up three percent from October 2019, while fruit and vegetable prices were up 2.6 percent from this same time last year.”
Looking ahead to 2021, The U.S. Department of Agriculture’s (USDA) Economic Research Service (ERS) is projecting retail food prices will return to more modest levels.
The service predicts a one to two percent increase for food at home and a two to three percent increase for food away from home. The 20-year historical average for both categories is 2.8 percent and 2.3 percent, respectively.
“Those projections seem to suggest an anticipation of a return to normal, but we’re not out of the woods,” says Lusk. “As of Nov. 1, 2020, consumer spending at grocery stores remained 11 percent more, while restaurant and hotel spending was 30 percent less than 2019.”
He continues, “Price levels remain more than they were previously. As such, it will be important to keep an eye on food affordability and measures of food insecurity as we move into 2021.”
Hannah Bugas is the editor of the Wyoming Livestock Roundup. Send comments on this article to email@example.com.