Rare bout of food deflation thankfully seen abating in 2017

by Josh Sosland
Share This:
Josh Sosland
In an already challenging, highly competitive environment for grain-based foods in 2016, baker efforts to generate growth were hampered by a highly unusual development in retail food — price deflation. Retail food prices declined 1.3% in 2016. Led by the precipitous 21% drop in egg prices, it was the first time since 1968 that retail food prices were down for a calendar year.

It wasn’t only eggs. Prices for meat, dairy, fats, sweets and beverages all declined last year. Grain-based foods did not escape the trend either. The Consumer Price Index for baked foods and cereal products fell 0.3% in 2016. Within this category, 14 of 18 grain-based sub-categories were lower in 2016, led by cereals, down 1.2%; flour and mixes, down 2.1%; rice, pasta and corn meal, down 1.5%; and crackers, off 0.5%. Bread was down a modest 0.1%.

Relief appears to be at hand. Projecting a better year for retailers in 2017 than in 2016, Moody’s Investors Service is forecasting food price inflation of 1% in the current year, a 2.3-point swing. Commenting on other trends, the credit rating agency suggested retailers (and perhaps food processors) need not worry excessively yet about the threat posed by on-line sales. Moody’s noted on-line food sales, while showing signs of growth, still account for less than 1% of total sales, a share that is not expected to climb past 3% during the next five years.
Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.



The views expressed in the comments section of Baking Business News do not reflect those of Baking Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.