Food price inflation has been a well-documented phenomenon in recent months, but retail dairy products have yet to face the same upward price pressure that has existed for many other commodities. Consumer price index (CPI) data for January compared to the previous year shows an overall 3.1% increase for dairy products, including gains of 6.8% for milk, 0.2% for cheese, and 1.1% for ice cream. The aggregate dairy price growth trails inflationary movements for meat products, up 12.2%; cereal and bakery products, up 6.8%; and fruits and vegetables, up 5.6%.

Comparing the second half of 2021 to five years earlier yields similar results. The CPI for dairy products only advanced 7.3% during that timeframe, compared to 19.9% for aggregate meat, poultry, fish, and eggs; 8.1% for fruits and vegetables; and 7.6% for cereal and bakery items. The overall food at home CPI grew by 10.9% during that stretch, with food away from home 18.3% higher.

Dairy moved higher in 2020

Part of the story includes the fact that dairy product prices grew more in 2020 than some food items, as government programs and more restrictive pandemic protocols in the spring contributed to higher demand for milk and cheese. But those modest price gains in 2020 have kept further increases well behind the headline rates for food as a whole, making dairy goods attractively priced when consumers visit the grocery store now.

Dairy products are expected to experience more price inflation in 2022, but since many dairy products require less processing and value-added activity than most other food items, dairy products should continue to be price-competitive for wary consumers. USDA’s Economic Research Service measures the farm value share of a number of commodities, and for the 2017 to 2019 period reports a 30 % farm share for dairy products as a whole, including 53% for whole fluid milk. This compares to 24% for fresh vegetables, 36% for fresh fruits, 21% for white sugar, 22% for pork, and 44% for beef.

Inflation has been a topic of concern for many and could remain a factor for many more months. Dairy products seem to be positioned well to continue as food products of value even in this higher price environment.

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(c) Hoard's Dairyman Intel 2022
February 17, 2022
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