Wednesday, November 4, 2009

Consumer Price Index 2009

The USDA recently published data on this year's Consumer Price Index (CPI) for food, as well as forecasts for next year. The CPI is a "market basket" of selected foods that is meant to reflect the foods purchased by a typical consumer, and is used to track retail food prices from year to year. The USDA predicts low-to-moderate food price inflation in 2009 of two to three percent - which is lower than 2007 and 2008 levels and similar to 2006, when the CPI rose by 2.4%.

The real news, however, is this:
The CPI for all food decreased from August to September 2009, was unchanged from July to August, and is now 0.2 percent below the September 2008 level. For the first time since 1967, the food CPI is below the previous year's level as declines in meat, dairy, and produce prices have pushed the food CPI to negative levels—a phenomenon that has not been seen in 42 years.
The analysis goes on to say that rising energy costs will likely put an end to this "deflationary period." Also notable is that the foods that have decreased in price are the unprocessed foods in the "food at home" category, in other words, meat, eggs, dairy, and fresh fruits and vegetables. This data supports what we already know: farmers, especially those who rely solely on selling their goods on the wholesale market, are having a really hard time right now. Another USDA data set on farm to consumer price spreads suggests that farmers generally receive about 15 to 30% of the consumer food dollar. So in recent months, farmers have been receiving a small portion of a shrinking number, since the cost of unprocessed food has fallen.

On the other hand, I've heard anecdotally that farmers with direct-to-consumer sales strategies, for instance those who sell at farm stands and farmers markets, are doing better than ever.  I'm interested to see the results of the research the USDA is doing on the value that different types of farms add to their goods.

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