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Global food price inflation on the rise

U.S. retail food price inflation has remained modest over past year.

After a steady decline in global food prices throughout most of 2017 and 2018, the summer of 2019 brought rising prices, according to Jayson Lusk, department head and distinguished professor of agricultural economics at Purdue University.

According to Lusk, as of October 2019, global food prices rose 6% relative to the same month a year earlier -- a pace that hasn’t been seen in more than two years.

“The recent global food price spike is primarily caused by rising meat prices, which have increased more than 10% in each of the last two moths relative to the same months in 2018,” Lusk said. “Reductions to the supply of pork in China due to African swine fever have played a major role in contributing to the upswing in global food prices.”

Reports of rising prices of onions in India and supply disruptions in Turkey and Nigeria are additional contributors, he added.

Still, the 6% year-over-year monthly increase in global food prices is modest in historical terms, Lusk said. From March 2007 to March 2008, global food prices rose 58% and, after falling more than 30%, rose again by almost 40% in mid-2011.

Despite the rise in global prices, Lusk said U.S. retail food price inflation has remained modest over the past year. From October 2018 to October 2019, prices of food consumed away from home increased 3.3%, and prices of food bought for at-home consumption increased only about 1%.

The U.S. Department of Agriculture's Economic Research Service has projected the overall annual inflation rate for food consumed away from home to be 2-3% for both 2019 and 2020. Annual inflation for food bought in grocery outlets for at-home consumption is projected to be a more modest 0.5-1.5%.

“These figures are low in historical terms but are slightly higher than the annual retail food inflation experienced over the past three to four years,” Lusk said.

Annual inflation rates for food consumed away from home were 2.9%, 2.6% and 2.3% and for food at home were -1.3%, -0.2% and 0.4% in 2016, 2017 and 2018, respectively. Helped by lower commodity prices, Lusk said prices for food consumed at home have risen at a rate slower than overall non-food price inflation, which averaged about 2.1% per year from 2016 to 2018.

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