USDA’s Economic Research Service (ERS) in its Food Price Outlook issued recently indicated food price inflation in 2013 likely will be higher than 2012 largely because of the delayed impact of the worst drought in decades across the Midwest.

ERS forecast food prices overall to rise between 3 to 4 percent in 2013 from the current year.  This compares with a price rise in the 2012 forecast of 2.25 to 2.75 percent compared with 2011.  The percent change in food prices from the previous year was +3.7 percent in 2011 and +0.8 percent in 2010.

“Looking ahead to 2013, inflation is expected to remain strong for most animal-based food products due to higher feed prices,” ERS said.  “Furthermore, inflation should be above the historical average for food categories such as cereals and bakery products as well as other foods.”

Poultry prices decreased 0.2 percent in November, mostly because of a decline in turkey prices during the holiday season.  Poultry prices are 6 percent above prices last year at this time, with chicken prices up 6.2 percent and other poultry prices (including turkey) up 5.1 percent.

Beef prices were up 0.1 percent in November and are 5.2 percent above last November, with steak prices up 4.2 percent and ground beef prices up 6.7 percent.  Reduced cattle herd sizes because of the drought led to falling beef prices in recent months; however, this factor was smaller than anticipated and beef price inflation remained strong in 2012.

Pork prices decreased 1.7 percent in November and are 2.9 percent below last November’s level.  As seen with cattle  hog liquidation because of the drought resulted in temporarily lower retail pork prices.  The pork consumer price index is now expected to increase through 2013.

Prices of food served at home were forecast to rise 3 to 4 percent in 2013 compared with a forecast hike of 2.25 to 2.75 percent.   Meanwhile, prices of food served away from home were forecast to rise 2.5 to 3.5 percent in 2013 compared with a forecast rise of 2.5 to 3 percent in 2012.

Food price inflation in the past decade was the strongest in 2008, when food prices rose 5.5 percent from the previous year.  Food price inflation in the last decade was the lowest in 2010 at 0.8 percent.