The U.S. Department of Agriculture expects U.S. food prices to increase by another 5% or more this year, a sign of accelerating inflation.
The USDA stated in its most recent monthly Food Price Outlook that higher input costs, transportation costs, and the Russian invasion of Ukraine were factors.
All food prices are expected to increase between 4.5% and 5.5%, it forecast, with the cost of cooking oils and poultry increasing the most by roughly 7%. “Retail poultry prices have been high with historically low stocks of frozen chicken,” it stated, attributing some of this to an outbreak of avian influenza. Egg prices are predicted to increase between 2.5% and 3.5%.
Only the cost of fresh vegetables was revised downward.
The USDA attributes increased dairy prices to “rapid increases in the consumption of dairy products.” In February, retail dairy prices increased by 1.6% and are expected to increase between 4% and 5% overall this year compared to last year.
The cost for fats and oils will increase by 6% and 7%, respectively; fresh fruit costs will rise between 5% and 6%; and processed fruit and vegetable will rise between 4.5% and 5.5%.
The USDA’s forecast is in line with a recent analysis by Dallas Fed economists on the impact of sanctions on Russia. “The effect of the Russian invasion is not limited to energy markets,” they write. “Russia and the Ukraine together account for 29 percent of global wheat exports. The disruption of exports from the Black Sea together with financial sanctions on Russia means that the supply of wheat and other grains is likely to be curtailed in 2022 and beyond.”
“The diminished supply, along with a shortage of fertilizer produced from natural gas, will drive up global food prices and reinforce the growth-retarding and inflationary effects of higher fuel prices.”
Prior to Russia’s invasion of Ukraine, inflation had already hit a 40-year high, driven partly by policies of the Federal Reserve, the nation’s central bank.
