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Food Inflation Everywhere, But Not A Bit In CPI (Yet)
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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Solid white Albacore(tuna) used to come in 6oz cans just over a year ago, and was just over a $1 a can. Now it comes in 5oz cans and is just over $2 a can. Food Inflation? Fuck that, it must be a figment of my imagination.
If you get the chance, weigh the tuna out of the can after its drained... Net weight definition has changed since it used to not include the water or oil in the can..NET weight was amount of fish...no longer.
I'll check that out thanks. Unbelieveable.
Over fishing makes it a scarce resource as well...
Also stuff like breyers ice cream, not even speaking of the 25% size reduction from 64 oz to 48, isnt even called ice cream with most of its flavors now... Called frozen dessert for flavors other than plain flavors like van, choc, etc. this is because cream is listed somewhere in the middle of the list, so not only are you getting crap disguised as ice cream, you pay more..
Notice also that Breyers isn't "all natural ingredients" any longer. What's that called, substitution?
Fucking Turkey Hill now has "All-Natural" ice cream, in 48oz containers. Pisses me off because ice cream used to be all natural, then became sugary frozen water crap, now makes a comeback in a 48 ounce container for twice the price.
Make your own (all natural ingredients) ice cream:
http://www.wikihow.com/Make-Ice-Cream
Hasn't John Williams of Shadowstats already pointed out this fact...for the past couple decades?
Yogi Berra Economy: Less Is More!
Or revise his "A buck ain't worth a dime anymore" to:
'A (FRN) 'buck' ain't worth a (mercury) dime anymore'
Bubble Bernanke and the fed are well aware of the lies about the CPI and inflation.
They keep devaluing while they con Cyprus and others to surrender their gold for a decreasing fiat.
Bernanke and the Fed discuss these matters with the ECB. The continued transfer of wealth and power to the central banks.
The people are really sheep. They allowed central banksters in Italy and Greece to take over the country and dictate. The people should rise up and hang these banksters like they did with Mussollini.
Just another reason to distrust the government. I remember going to one of my favorite places to shop for food, where premium pasta was $.50 to $.70 per pound. Two years later its $1.25 for the low end stuff and $1.75 to $2.50 for the higher end. And the manufactures are the same, the weight the same, the origin the same. So why isn't this reflected in the inflation numbers, when on average this is happening across a broad cross-section of foods?
And they say NO INFLATION. This is just one example, there are many, many others.
Just saying, the public knows,...and they know the numbers are UN-TRUE. It is one reason Congress and politicians in general are held in such disdain. While they have protected themselves from the increases through pay hikes and benefits, they alone get
The public knows the lies and resent being lied to, and resent their employees fucking them.
a hershey's bar is 1.69
no inflation here terrorists and haters
hershey's bars were 50% more expensive today as measured against bitcoin but curiously unchanged against tulips and guilders
"The bullshit was piling up so high you needed wings to stay above it."
--Captain Willard
When I got marred in '05 Veuve Clicquot had held at about $32 per bottle for a decade or more ... it's over $50 at Lucky's.
http://www.wine-searcher.com/wine-62814-0001-veuve-clicquot-ponsardin-brut-champagne-france
... and good avocadoes are VERY hard to get, even in CA. Hell yes, that plus the price of lobster? INFLATION!!!!!!
I like reports from the field. It really drives the point home more than statistics.
In 2001/2002 you could buy a whole cooked chicken from my supermarket deli. Today that same chicken, cooked the same way, costs $10.95. So what's that, like 85% inflation in a little over 10 years? 1% inflation my ass.
Avocado prices are retarded. If you know anything about the trees of many varieties, the average tree can give 200-300 avocados once its mature. I have a relative that has a huge one in his backyard - easy that puppy has 300+ on it in season and they grow more than once - problem is picking them cause the tree is so big - we can only pick what we can grab with a picker or picker and a ladder. 100s are far above what we can reach but not the commercial growers.
My guess is there is collusion in pricing either on the stores or the growers side - avocados should be cheap - and you do see them so occasionally (0.25 each, or 0.50 each) but then a few weeks later they are 1.00 or 1.5 each. It could be the retailers nailing consumers on them - to me it seems stupid because I see how many a single tree has - an orchard would give 50k easy.
fertilizers, pesticides, tractors, packaging, processing, shipping, it's all about oil prices. I grow my own fruits and vegetables (I have an overproduction problem) and i drink water from my Reverse Osmosis System, for me food is cheap.
My guess is CPI does not rate per OZ on many items. Instead of showing inflation they simply reduce the amount you get for the same price (or slightly higher). For packaged goods this is a big deal. For meats, dairy it cannot be covered up - the price per oz is what it is. For the others they can keep the same box size and reduce contents, or slightly reduce box size and reduce contents as well.
Ice cream used to be sold in 1/2 gallon - now most are not. They make the package look like it is but its not. The consumer is tricked into thinking its the same amount based on the price and the general size - nope - its not. The same is so for most other things people buy - Kraft Mac and Cheese - box the same but contents less, cereal less, pasta less ( 12oz packages instead of 16 in many cases, look the same)
Saying the price of cereal raised 1% does not do it if the measurement is not per OZ on a standard box - not the value 5lb, not the bargain 6oz, the most popular, average box size per oz.
the price of walrus flippers
free....
if you can catch them ..
"Inflation" is a monetary process. Higher prices from drought and government's need to put food into your gasoline tan (corn to ethanol policy) is not inflation. Lastly, if one wants to stay alive by eating "perishables", it makes sense that quality costs more, but there is more value too.
1.6% food inflation for the last year my bumm! I can think of several things I purchase that have gone up 50%. Toss in the fact that many packages have shrunk in size with the price staying the same, and I'll bet we are looking at more like 8-10% inflation on food in the last year.
My favorite cake mix package contents have shrunk 16%!! When I contacted them they said it was reformulated and I shouldn't notice a difference. Tell that to my 13x9" pan. When I mention this to people, I can't believe how many thought the same thing I did before I noticed the shrinkage in package contents....that they were doing something to cause their cake to come out smaller/less height. So I've gone back to cooking and baking from scratch. Bye-bye B.C.
CPI is nonsense. By my reckoning and shopping, food prices have doubled in the last 3 years.
Someone needs to take the people who constructed that meaningless statistic out back of the woodshed (or Starbucks) and beat some sense into them.
Lies, all lies.
Governments lie.
Sheep are stupid.
And gov't schools and colleges produce good little sheep.
was no joke Miffed, I have seen a lot in my 40 plus years of hunting. I bowhunt legally a 25 minute drive NW of Ohare airport in a NW suburb of Chicago. Dr Engali, I hunted on a farm back in michigan in my youth that was in a lease program with the state DNR therefore semi-public if you will. I shot a buck a little to far back and waited a half hour before I began following blood trail. This was gun season so I didnt wait too long. After a quarter mile on a good blood trail and cresting a hill there were two other hunters gutting my deer. No other shots had been fired. I walked up to them and they turned too look at me as I said "who shot him?" They said they were just lending me a hand by getting started gutting him. They were embarassed I think. I said don't let me stop you and they finished field dressing for me and I dragged it to the road. It could have turned out differently as all 3 of us were armed and I am not shooting anyone over a deer. This was 30 plus years ago. On a side note there were so many deer in a suburb just north of me they were stripping all of the plants and shrubs on peoples property. That suburb does not allow bowhunting and they ended up hiring snipers at 1000 dollars per animal to cull 60 plus deer. They take the meat to county jail. What a waste of money. There are plenty ethical bowhunters who buy licenses who would be happy to make their deer problem go away. I had a buddy killed on his motorcycle from hitting a deer last fall. Tree huggers and bambi lovers. I worked three months on a kill floor in a beef slaughterhouse. I would much rather be a deer, enough said..
I hate government statistics. They are blatantly bogus. My REAL grocery inflation YoY is 12.2%.
As one of the members of the 1995 Boskin Commission stated many years after they'd done their damage, their whole effort was aimed a lowering the CPI figures however possible, not to come up with a more accurate figure.
And the even more hilarious part of this manipulation is, as pointed out in the excellent book "Greenspan's Bubbles," the fedgov agencies and the Fed use the fedgov's own garbage, manipulated figures when they plug data into their simplistic, antiquated, garbage Keynesian models. So it's garbage data into a garbage model.
And yet that crap is used to run the world.