Outlook for U.S. Retail Food Prices and Inflation in 2009

Transcription

1 Outlook for U.S. Retail Food Prices and Inflation in 2009 Ephraim Leibtag, PhD Food Markets Branch, Food Economics Division ERS-USDA Presented at the 2009 Agricultural Outlook Forum Global Agriculture & Rural America in Transition 1

2 CPI vs. CPI for Food Annual Percent Change CPI CPI for Food 2

3 PPI for Retail Grocery Department Margins 20 Annual Percent Change Grocery PPI Meat PPI Dairy PPI Bakery PPI Produce PPI Frozen Food 3

4 Sources of Retail Price Changes Changes in Costs Cost of Goods Sold Operating Costs Changes in Retail Market Competition Number of retailers in a market Type of retailers Specialization Differentiation Changes in Consumer Demand 4

5 Where a Consumer Dollar Spent on Food Goes Depreciation and Repairs, 5.0% Rent and Interest, 6.5% Profits, 4.0% Taxes and Other Costs, 7.0% Labor, 38.5% Energy and Transportation, 8.0% Advertising and Packaging, 12.0% Farm value, 19.0% Source: Economic Research Service Calculations using 2006 Data 5

6 Trends in Retail Food Markets Impact of the Recession Volatility in food commodity markets Transportation and energy costs Competition from a variety of formats Supercenter/Warehouse Club/Dollar/Limited Assortment/Upscale/Gourmet Food Safety Location and size of store Lowfat/Sugar Free/Natural/Organic /Fresh/NoTransFat NoTransFat/Local 6

7 GDP Growth and Food Inflation, * Annual Percent Change Real GDP Percent Change *2009, 2010 forecasts Food CPI Percent Change 7

8 GDP Growth and Food Inflation, * Annual Percent Change Real GDP Percent Change *2009, 2010 forecasts Food CPI Percent Change 8

9 GDP Growth and Food Inflation, * Annual Percent Change Real GDP Percent Change *2009, 2010 forecasts Food CPI Percent Change 9

10 GDP Growth and Food Inflation Trends Mean Growth Rate : GDP 3.5, Food CPI : GDP 3.7, Food CPI : GDP 4.3, Food CPI : GDP 3.2, Food CPI : GDP 2.8, Food CPI 2.9 Same Year Correlation Patterns : : : : :

11 GDP Growth and Food Inflation Lags 1-Year Lag Correlation Patterns : : : : : year Lag Correlation Patterns : : : : :

12 Food commodity prices down 30% from the summer, but still up 25% since January Source: International Monetary Fund: International Financial Statistics 200 Food commodity price index 77% increase at peak Index = M1 1982M1 1984M1 1986M1 1988M1 1990M1 1992M1 1994M1 1996M1 1998M1 2000M1 2002M1 2004M1 2006M1 2008M1 12

13 Prices of Many Commodities Rose Even More Crude oil Average of all comodities Food commodity index Index: 2005 = Source: International Monetary Fund: International Financial Statistics 13

14 Spikes in food commodity prices: Will this time be any different? Index: 2005 = Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Corn Soybeans Wheat Rice Food commodity index Source: International Monetary Fund: International Financial Statistics 14

15 Food vs. Energy, Annual Percent Change -20 CPI for Fuel Oil CPI for Gas and Electricity CPI for Gasoline CPI for Food 15

16 Wal-Mart Supercenter Store Count Source: Wal-Mart Annual Reports Number of Supercenters 16

17 Expenditure Shares for Nontraditional Food Stores Continue to Rise 100% 80% 60% 40% 20% 0% Traditional Retailers Source: ERS Calculations of ACNielsen Homescan Data Nontraditional Retailers 17

18 Expenditure Shares for Nontraditional Formats Expenditure Share (Pe Warehouse Clubs Mass Merchandisers Supercenters Other 18

19 Food CPI Well Above Historical Average in 2008, Lower in 2009 Annual Percent Change in CPI for Food Low 2009 High 19

20 Why? 2008 Higher commodity costs (corn, wheat, soybeans, etc.) Higher energy and transportation costs Increased U.S. exports due to weaker dollar/growing global demand 2009 Food commodity costs down from summer highs Energy prices down Domestic and global demand weakens 20

21 Caveats Food commodity volatility Commodities safe or Nothing is safe Food ~ Energy Connection Global demand for U.S. exports Duration and depth of recession Consumer demand for food 21

22 Percent Change in Food CPI (a) Items Forecast 2009 All Food to 4.0 Food Away from Home to 4.5 Food at Home to 3.5 Beef to 2.5 Pork to 2.5 Other Meats to 1.0 Poultry to

23 Percent Change in Food CPI (b) Items Forecast 2009 All Food to 4.0 Food at Home to 3.5 Fish and Seafood to 5.0 Dairy to -3.0 Fats and Oils to 4.0 Sugar + Sweets to 4.0 Eggs to

24 Percent Change in Food CPI (c) Items Forecast All Food to 4.0 Food at Home to 3.5 Fresh Fruits to 5.0 Fresh Vegetables to 4.5 Processed F + V to 4.0 Cereals + Bakery to 3.5 Nonalcoholic Bev to

25 Contact Information Ephraim Leibtag, PhD For more information, see 25

26 Total world grain & oilseeds Stocks and stocks-to-use ratio Million metric tons Supply / Use (%) % Ending stocks Stocks / Use 30% % % 15% % 5% Source: USDA PS&D Database 0% 26 26

27 Nontraditional Expenditure Shares Warehouse Clubs Supercenters Mass Merchandisers Other % 3.2% 2.8% 5.2% % 4.3% 3.0% 5.9% % 5.6% 3.1% 6.5% % 7.2% 3.3% 7.0% % 8.1% 3.9% 8.0% % 10.5% 3.6% 8.1% % 11.8% 3.6% 8.5% % 13.2% 3.6% 7.8% % 15.0% 4.7% 6.0% Source: ERS Calculations using Nielsen Homescan Data February January 26,

28 Volatile Farm Product PPI Components 60 Annual Percent Change Farm Products PPI Corn Wheat Soybeans Milk 28 28

29 Farm Product PPI Components (b) Annual Percent Change Farm Products PPI Livestock Poultry Fresh Fruits Fresh Vegetables 29 29

30 Food at Home vs Food Away from Home, Annual Percent Change CPI for Food at Home CPI for Food Away from Home 30 30