By Alex Tanzi
Diners may want to think twice about going for an American breakfast, which is poised to get pricier this year in the U.S. Department of Agriculture’s latest monthly projections.
Choosing a cereal option, or going for fresh fruits, won’t provide relief, either.
Eggs are among the items seeing bigger price gains this year in the Agriculture department’s monthly outlook. The agency sees a 6% to 7% gain -- a big change from three months ago, when it predicted a range of a 0.5% rise to 0.5% drop. Cereal and bakery products have the same 6% to 7% projection, as do fresh fruits.
Overall, the agency now expects food prices to rise 5% to 6% this year -- at least double the forecast of about 2.5% three months ago. Other categories with big increases compared with last month’s outlook are beef, poultry and vegetables. A year ago, the USDA forecast little inflation, or even price drops, for many food groups.
An increase of around 5.5% to the median households food budget would ding budgets by around $450 per year, according to calculations by Bloomberg.
Food prices have been under pressure from a variety of sources. Crop flows from Ukrainian ports have been disrupted by that nation’s invasion by Russia. Spring planting has also been affected. Ukraine and Russia together account for over a quarter of the world’s trade in wheat and for about a fifth of corn sales.
“Among the nearly 50 commodity-price series we study, wheat spot-price changes stand out as a bellwether for food price inflation,” JPMorgan Chase & Co. analysts Peter McCrory and Daniel Silver wrote in a note last week.
Food prices are also under pressure from wage inflation and energy costs.
“Given exceptionally tight labor markets and already-elevated inflationary pressure from commodity prices prior to Russia’s invasion of Ukraine, we suspect food inflation will remain firm in months ahead,” the JPMorgan analysts said.
The Wall Street bank estimates that each 1% increase in wages in the food-services sector is associated with a 0.34% acceleration in food price inflation.
The grocer Albertsons Cos. this month said that it expects food inflation to remain at elevated levels at least through September. And, expectations about year-ahead food price changes among consumers in a monthly Federal Reserve Bank of New York survey hit 9.6% in March, a record for that data series.
©2022 Bloomberg L.P.