Food Inflation Everywhere, But Not A Bit In CPI (Yet)

Tyler Durden's picture




 

Reported U.S. food inflation has been a paltry 1.6% over the last 12 months, one of the lowest growth rates in food & beverage CPI since late 2010. However, ConvergEx's Nick Colas notes that the severe drought in the Midwest over the summer of 2012 will likely drive up food costs this year 3-4% across the board, by the USDA’s estimates. These headline numbers, however, don’t accurately reflect the prices of the real "basket of goods" that we bring to the checkout counter every week at the grocery store. Consequently, Colas warns, the CPI report doesn’t necessarily mirror the increase in our grocery bill. Nor does it take into accountdifferent food choices (e.g. healthy vs. junk food), farm prices, or demographics, all of which the USDA publishes separately. The actual, visible inflation at the checkout counter may lead the American consumer to think – perhaps inaccurately – that overall CPI is rising or falling at a similar pace. For a more detailed, accurate reflection of food CPI, then, we have to aggregate all of these indicators to see how they compare to overall CPI. In short, inflationary expectations may well be set to rise dramatically in 2013: “shopping cart inflation” was upwards of 1.3% last month, almost double the 0.7% overall CPI.

 

Via Nick Colas, ConvergEx,

I have the pleasure of being the primary grocery shopper and cook when I return home to New Jersey to visit my parents, a “privilege” my mother happily bestows upon me when I arrive. Both of my parents recently became vegans – with the rare exception of pizza, of course – in an effort to improve their health and cut the risk for future disease. While I can attest to the fact that the vegan lifestyle has vastly improved both, unfortunately I cannot say the same for their wallets. When we made the switch from steak to tofu and from hamburgers to stir-fries, the weekly grocery bill was suddenly higher. Turns out the “vegan” foods – mainly fruits, veggies, grains, and beans – add up much faster than lunch meat and frozen entrees.

In hindsight, the higher grocery bill shouldn’t have come as a surprise: prices are higher, and increase faster, in certain foods rather than others. The expected results from the drought last summer are only one example: corn, poultry, and produce prices are expected to surge as the corn shortage comes full circle. The USDA’s food CPI forecast for 2013, which you can find here, predicts a 3-4% rise in its basket of goods in 2013, with dairy product and fresh fruit & vegetable prices rising more than 4%. These foods supposedly make up 13.3% of the USDA’s “basket” (in relative importance) for the year.

Unfortunately, these weightings don’t seem to accurately represent the real world  baskets Americans bring to the checkout at their local supermarkets. The top 10 purchased items in US food stores, according to various surveys, are (1) milk, (2) bread, (3) eggs, (4) beef, (5) chicken, (6) cereal, (7) salty snacks, (8) lettuce, (9) cheese, and (10) non-alcoholic beverages (juice and soda). While the USDA reports only 0.1% food inflation (seasonally-adjusted) for February 2013, these top items actually rose an average of 1.3% over last month. It would seem, then, that our shopping carts are getting more expensive than the headlines numbers might indicate. If, as these surveys suggest, we purchase items growing faster in price more often than those that decline or stagnate, these foods could have a disproportionate – and in this case, inflationary – impact on what we expect overall inflation to be. This is what economists call, unsurprisingly, “Inflationary expectations” and everyone from Fed Chairman Bernanke on down to the most junior staffer at a regional Fed worry intensely over these popular perceptions of future inflation.

We perused the USDA CPI data to find out which food (or foods) is costing us more, and which might help us save a few bucks. Healthy eaters beware: the data is not on your side.

Lettuce and apples have risen the most in price compared to February 2012, up 24.5% and 11.1%, respectively. Both items are, admittedly, out of season in February; but remember, these are like-month comparisons. The rising cost of lettuce in particular may hurt the American consumer, as it is one of the most frequently purchased items. Lean meats have also grown much more in price than their more “fattening” counterparts: chicken is up 5.0% over last year and turkey 5.1%, while pork is down -1.5% and ham up only 1.0%.

 

Lettuce, hot dogs and fresh fruit grew the most in price from January to February 2013, up 6.4% on average.

 

Potatoes, sweeteners, and bread products, on the other hand, are less expensive than they were just last year, down an average of -4.6%. Lamb and mutton products are the single cheapest item in comparison to last February, down -16.6%; coffee is also surprisingly lower, down -4.1%. The products that fill out the less-expensive group, however, are not necessarily what you might consider “healthy”: butter, sugar, and fats & oils, are all among the top “losers” in price.

 

Compared to the month prior, tomatoes, frozen fish, and peanut butter have declined the most in price, down an average of -3.8%.

 

It may also cost you to be “health-conscious” when choosing different iterations of a certain product, according to the BLS’s CPI data. Wheat bread, for example, rises in price much faster than white bread, and buying whole milk is becoming more expensive than less-fat versions. Fresh produce is constantly climbing in price (especially out-of-season fruits and veggies), while frozen and canned versions are dropping in cost. Unfortunately, health-conscious is not akin to price-conscious.

 

While food away from home typically climbs at a faster rate than food at home (+2.3% over last year vs. 1.6% for at-home), the USDA predicts that home-cooked food will actually grow faster in 2013: 3-4% vs. 2.5-3.5%. Fresh produce and dairy products are expected to be the most expensive in 2013 compared to last year, up 3.5%-4.5%. Somewhat surprisingly, though, poultry prices are not expected to grow more than the market basket as a whole, despite worries of a surge thanks to the corn shortage.

 

Finally, according to the USDA’s farm price spread reports, retail prices at grocery stores in 2012 were well on their way back to pre-recession highs in 2011 (the latest data available). By this unwelcome measure the U.S. economy has clearly “recovered” quite well.

A little information about our food consumption habits might be able to tell us where our grocery bills are headed as well. The USDA conducted a National Health and Nutrition Examination Survey in 2002, and has updated figures on food availability and consumption each year since: the latest data available was released in September 2012. Consumption data, which is parceled out by several demographic parameters, is the most useful as somewhat of an alternative indicator for our activity at the grocery store. Our main findings were not what we expected, to say the least:

Poundage-wise, Americans take in the majority of our food in fruits and vegetables, followed closely by dairy products. The single most-consumed item by weight is milk; oranges come second. This data point is surprising, given the stories of declining milk consumption, like this one from the WSJ. It is also notable considering neither of these two items is one of the top purchased items at grocery stores. 

 

The biggest food consumers, based on poundage of food eaten per year, are Caucasian, college-educated, high-income male adults between the ages of 20 and 39 who maintain a healthy weight. According to the data, high-income households (300% above the poverty line) consume 13% more pounds of food each year; males eat 24% more than females; and college-educated persons eat 22% more than those with less than a high school diploma. Those identifying as Hispanic tend to eat the most at home, while Caucasians eat the most away from home.

 

Most surprisingly, persons with a “healthy weight” eat 7% more pounds of food per year than obese persons. The key here, as you might expect, is substance: obese persons eat the least fruit and more meat than overweight or healthy-weight people. Interestingly, though, they come up to par on veggies, fats & oils, and grains. 

These observations, combined with the data from the USDA’s CPI, point to one simple conclusion: we’re all going to feel (and might already be feeling) the pinch at the grocery store, even if we don’t elsewhere. Some of us, according to the USDA data, may feel it more than others: those with male children between the ages of 2-11, for example, might expect to spend a bit more on produce, as these kids are the single biggest consumers of those quickly inflating apples in the country. College-educated women between the ages of 40-59, meanwhile, might find themselves eating less salad: the biggest consumers of lettuce may not enjoy a 25% increase in price.

All of this analysis ultimately comes back around to that econo-geeky topic of “Inflationary expectations.”  Though food CPI is certainly the most tangible inflation indicator to most Americans, it is important to know it is not the only one; there’s a reason the BLS prints an “all items less food” number. That’s not to say it should be ignored, of course. It wouldn’t do to overlook price increases in the commodities that take up a full 15% of our income, on average. We just may need to extrapolate it from how we view inflation overall. And if there is a real bout of food inflation brewing – with some major demographics feeling a distinct pinch – that may well be enough to change the level of consumers’ expectations for future price increase in and out of the grocery store. 

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Wed, 04/10/2013 - 21:30 | 3434719 Zer0head
Zer0head's picture

food in the US is cheap

Wed, 04/10/2013 - 21:31 | 3434726 Pool Shark
Pool Shark's picture

 

 

Food cheap.

Taxes expensive...

 

Wed, 04/10/2013 - 21:49 | 3434807 icanhasbailout
icanhasbailout's picture

food is cheap when it comes with oily anal leakage

Wed, 04/10/2013 - 22:07 | 3434857 Supernova Born
Supernova Born's picture

Cheap as in crap, inexpensive as in bullshit.

Wed, 04/10/2013 - 22:50 | 3435017 Key-Rick
Key-Rick's picture

Define food.  GMO Frankenfood is not on my table. home or locally grown only.  still quite cheap. 

Wed, 04/10/2013 - 23:21 | 3435112 francis_sawyer
francis_sawyer's picture

Whether food is cheap or not totally depends on what's in your basket [both quality & pricewise]...

~~~

That said... Food, relative to the ever shrinking dollar is still one of the better bargains out there [when you compare it to either ammo or gasoline]...

In 2012, for example... I spent more time 'stocking up' on food than either of the other two [especially when ammo went gonzo]...

Thu, 04/11/2013 - 06:15 | 3435536 bonderøven-farm ass
bonderøven-farm ass's picture

Food is inexpensive so long as you're not depending on others to do the 'dirty' work for you.  My wife and I spent less than $600 last year at the grocery store; a good portion of that on wine for guests.  A weekend gardner with evening maintenance can easily provide all of the vegetables necessary for several people on a 50'x50' untilled plot year round (using hotbed row techniques during the Winter months). 

Cut out the middle-man, snub the corporate over-lords, become a friction to the machine....grow your own bitchez......

Thu, 04/11/2013 - 15:33 | 3437787 thisandthat
thisandthat's picture

Define cheap - when it comes to your health, what is expensive?

Thu, 04/11/2013 - 06:52 | 3435566 valley chick
valley chick's picture

+1 for anal leakage reference aka "tuna" in a can.   Been canning my own tuna...real tuna.

Thu, 04/11/2013 - 08:59 | 3435814 minosgal
minosgal's picture

dumb questions, if you don't mind ---

do you scald it first (as in salmon prep)? or just regular 110 minutes/10 lbs pressure?

Wed, 04/10/2013 - 21:52 | 3434812 James_Cole
James_Cole's picture

Food prices in the US are noticeably cheaper vs many comparable countries. 

Wed, 04/10/2013 - 22:20 | 3434916 Miffed Microbio...
Miffed Microbiologist's picture

Perhaps if compared only as percentage of income and looking at the average American consumer who eats processed GMO garbage. Our bill is incrediblely high because we buy only staples: meat, vegetables, seasonal fruit, raw jersey milk. We shop mostly at farmers market and a local natural food store. For a family of three we spend $900/month for groceriesif we are very careful, but $1200 is more the norm. This is dramatically higher than what we spend just 3years ago. Personal experience trumps CPI in my book.

Miffed:-)

Wed, 04/10/2013 - 23:07 | 3435072 The Second Rule
The Second Rule's picture

And who's to blame for that? Maybe that in the last election big ag blocked the labeling of GMO foods so that consumers might actually know what they are buying?

Thu, 04/11/2013 - 00:17 | 3435242 James_Cole
James_Cole's picture

I was speaking anecdotally, but there are also websites that compare such things. For your family of three in the US this site suggests approx. 775$, not far off from your estimate. 

http://www.numbeo.com/food-prices/

Wed, 04/10/2013 - 21:31 | 3434728 Hopium Dealer
Hopium Dealer's picture

you must have a EBT card.

idiot.

Wed, 04/10/2013 - 21:34 | 3434744 Cdad
Cdad's picture

Don't feed the "instant response trolls" please.  Thank you.

Wed, 04/10/2013 - 21:43 | 3434779 TwoShortPlanks
TwoShortPlanks's picture

There's only one thing to do now:  https://www.youtube.com/watch?v=vWz9VN40nCA

 

 

Thu, 04/11/2013 - 04:41 | 3435491 Sudden Debt
Sudden Debt's picture

compaired to Europe it is cheap.

But American food doesn't look like European food at all!

Just buy some ribs, and compaire those to european ribs. There about 3 times bigger.

And the reason? Steroids and other crap.

Thu, 04/11/2013 - 06:42 | 3435560 Urban Redneck
Urban Redneck's picture

American food prices benefit from USD hegemony.  Between the 50% discount (courtesy of the MIC) and domestic subsidies (which every country uses to disguise price discovery) most Americans have no idea what the true "cost" of their food is, and thus have the luxury of wasting huge quantities of food (and Frankenfood) on a per-capita basis (for now).   

Thu, 04/11/2013 - 06:50 | 3435564 Ghordius
Ghordius's picture

I just hope that the TAFTA, the Transatlantic Trade (Zone) deal does not happen, otherwise we europeans will also have the dubious honour of Frankenfood consumption. MIC? what's that?

Thu, 04/11/2013 - 07:52 | 3435630 Urban Redneck
Urban Redneck's picture

Military Industrial Complex

I thought they already had Frankenfood in your neck of the woods?  I seem to be surrounded by it on all sides- with the local holdouts being increasingly branded extremist (whether SVP or Green).

Thu, 04/11/2013 - 11:45 | 3436669 Ghordius
Ghordius's picture

just some of them at EU level, and stronger restrictions depending from the country - the CH would be middle-of-the-road, in an eurocomparison

Wed, 04/10/2013 - 21:32 | 3434733 Banksters
Banksters's picture

THe sky could be raining red hot railroad spikes, and bernank and da gov would tell you the world is fine.

Wed, 04/10/2013 - 21:48 | 3434794 LetThemEatRand
LetThemEatRand's picture

Do you have any idea how many windows a squall of raining railroad spikes would break?  Not just fine.  Mega bullish.

Wed, 04/10/2013 - 22:45 | 3434996 wee-weed up
wee-weed up's picture

It's very simple really...

the Obama Admin bureaucrats are fucking with the CPI numbers! Period!

Thu, 04/11/2013 - 03:39 | 3435444 cynicalskeptic
cynicalskeptic's picture

They've been screwing with statistics since telling the truth got Carter thrown out of office (that and the Repubs cuttiong a deal with the Iranians to hold the hostages until after the elections in exchange for arms from the new administration).  BOTH parties lie like hell to sty in office.  NOBODY is telling the truth.

W's whole presidency had negative GDP 'growth' iof you factored in the real inflation rate.   

 

See shadowstats.com

 

Thu, 04/11/2013 - 08:44 | 3435764 Chief_Illiniwek
Chief_Illiniwek's picture

Ya' think...????

Wed, 04/10/2013 - 21:40 | 3434755 DaveyJones
DaveyJones's picture

your right, the quality is extremely cheap.

You can thank Monsanto...and your government

we, of course, have also exported our inflation

but we're losing that battle

and it's accelerating

Wed, 04/10/2013 - 21:56 | 3434808 TwoShortPlanks
TwoShortPlanks's picture

Looking at her slightly bent plastic water bottle, my girl friend asked me the other day, "how come this water bottle plastic is so thin the bottle is crooked?"

My response: "Inflation"

_ _
  >
  O

"I see!"

PS. Image not to scale. Not Chinese either, she's Qwerty.

Wed, 04/10/2013 - 21:55 | 3434827 Pants McPants
Pants McPants's picture

Exactly right. 

Further supporting the article's point is the amount of .gov subsidies within certain food industries (e.g., meat, grain, dairy)

Wed, 04/10/2013 - 22:05 | 3434855 Just Ice
Just Ice's picture

Speaking of cheap quality, very tired of going into stores to see huge oversized veggies on offer... if gmo has caused the food to become grossly deformed and overbloated in size, what does the food then cause the people consuming it to become?

Wed, 04/10/2013 - 22:13 | 3434891 Ms. Erable
Ms. Erable's picture

I always get a kick out of the net containing 4 garlic bulbs that are exactly the same size and shape.

Thu, 04/11/2013 - 01:21 | 3435343 zhandax
zhandax's picture

Easily done when you charge twice the price of the bulk garlic at the farmer's market.  BTW, it is called a fist rather than a bulb.

Wed, 04/10/2013 - 21:59 | 3434847 prains
prains's picture

food in the US is cheap

if it comes in a box, wrapper, container, or some other sign of a mechanical process it's most likely NOT FOOD, it's a product to eaten but doesn't necessarily mean it contains nourishment for your body. It does however contain LOTS OF CALORIES, but typically a body requires nourishment in the form of nutrients, minerals etc. Processed edible products rarely contain nutrients but swap them out for calories. Hence 75% of Americans are sporting a front bum.

There's a saying "you're overfed, but under nourished" which translates to you are FAT but STARVING.

 

FOOD are the things brought to you by mother nature, 3.5 million years of eating it doesn't lie

Wed, 04/10/2013 - 22:08 | 3434873 ziggy59
ziggy59's picture

Protein has skyrocketed...

Thu, 04/11/2013 - 07:45 | 3435621 Esso
Esso's picture

Right, that ensures a population of obese, diabetic, walking heart attacks.

The government recommended grain-based diet makes for a fat, sickly, citizenry too weak to fight them and ensnared by a govt run hellcare system designed to bleed their wealth away.

Mission Accomplished!

Wed, 04/10/2013 - 22:14 | 3434889 Ted K
Ted K's picture

Paging Dr. Bruce Krasting, Paging Dr. Bruce Krasting, X-ray on patient for "Don't know what the f*ck you're talking about on inflation" reads benign for inflation. Go back to "Shrill for Gold", do not collect $200.

Wed, 04/10/2013 - 22:15 | 3434897 Charles Nelson ...
Charles Nelson Reilly's picture

Yeah, real cheap when you're shopping at Walmart and shoving every single GMO laced product they have in the place down your throat. I love running into 9 year olds there that weigh more than me.

Wed, 04/10/2013 - 22:18 | 3434907 orez65
orez65's picture

Compared with other countries, yes.

But it is rising on a monthly basis.

For example potatoes have risen to $0.99 per pound.

Then there is the "stealth" inflation.

For example, a "half gallon" of orange juice used to contain 64 ounces now it contains 59 ounces.

A can of tuna fish and a bag of pita chips have been "stealthed" also ... 

Wed, 04/10/2013 - 23:31 | 3435150 ImReady
ImReady's picture

Most Americans could use a 25% reduction in food. Inflation problem solved! 

Thu, 04/11/2013 - 01:38 | 3435359 zhandax
zhandax's picture

Re-read the article.  People eating healthy foods consume 7% more (according to the author, I didn't calculate this).  I agree with you in spirit.  DIng dongs and hohos need a 100% reduction.

Wed, 04/10/2013 - 21:32 | 3434725 Cdad
Cdad's picture

Tyler,

One of your truly helpful skills...is that of summarizing things in the first 60 or so words within any post you write.  And for the lack of time everywhere around me, I thank you for that.

Cdad

Wed, 04/10/2013 - 21:32 | 3434729 djsmps
djsmps's picture

Give me a fucking break. I've seen increases of 30-40% in certain food items.

Wed, 04/10/2013 - 21:40 | 3434763 DaveyJones
DaveyJones's picture

agree

has anyone calculated it with the quantity reductions?

Wed, 04/10/2013 - 21:42 | 3434768 Spastica Rex
Spastica Rex's picture

About 1984.

Wed, 04/10/2013 - 21:54 | 3434823 TwoShortPlanks
TwoShortPlanks's picture

Disposable. Razor. Cartridges.

Wed, 04/10/2013 - 21:58 | 3434836 Pants McPants
Pants McPants's picture

Yes!  I reverted to an electric for this reason, after about a year of stretching standard Gilette's well beyond its recommended lifespan.  Razor costs are truly unbelievable.

Wed, 04/10/2013 - 22:12 | 3434883 respect the cock
respect the cock's picture

Tell me about it.

I've been buying Mach 3 dispozables in bulk from Costco for 10+ years.  They've gone from 20/pkg to 16, and have doubled in price.  $50/pkg now! Usually lasts me close to 6 months, but fuck...

Wed, 04/10/2013 - 23:29 | 3435143 Burnbright
Burnbright's picture

That is why you should buy a saftey razor. You can buy a cheap one for $25 and a 10 pack of high end blades (feather) for $6 lasts a long time. If you clean the blades after every shave with hot water and a cotton cloth a blade lasts me about a month shaving 2-3 times a week. 

Wed, 04/10/2013 - 22:28 | 3434940 Miffed Microbio...
Miffed Microbiologist's picture

I barely remember the rampant food inflation in the 70s being a teenager but I can't say I have any recollection of size reductions. Perhaps this is why it was so keenly felt. I guess it's easier to fool people today with smaller containers.

Miffed:-)

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