This makes understanding food price changes and their effects on consumers an important matter for Congress. This report provides information on the current status and outlook for U.S. food prices, measuring their changes and how such changes relate to U.S. consumers. The fourth section, " Recent Food Price Inflation ," examines retail food price inflation, including a review and discussion of the level of food price inflation registered by the consumer price index for all-food, at-home-food, and away-from-home-food purchases as well as for major food groups. Summary

For households with low disposable income levels where food expenditures are a large share of the budget, rising food prices result in greater responsiveness and may force more difficult budgetary tradeoffs than in higher-income households with smaller food-budget shares. The Consumer Price Index (CPI)

The CPI is perhaps the most widely reported measure of U.S. price inflation. The Food-at-Home CPI reflects changes in the prices of foods consumed at home. Rapidly Inflating Global Commodity Markets, 2006 to 2008

Several economic factors emerged in late 2005 that began to gradually push market prices higher for both raw agricultural commodities and energy costs. Driven largely by these demand forces, both general inflation and food price inflation began to accelerate in 2007 and reached a peak in 2008 when the All-Items CPI reached 3.8%, highest since 1991, and the All-Food CPI peaked at 5.5%, highest since 1990 ( Figure 7 and Figure 8 ). The 2008 Financial Crisis Triggers a Severe Recession and Price Deflation

The situation of sharply rising prices through the first half of 2008 came to a sudden halt when the financial crisis hit U.S. and global commodity and financial markets in mid-2008 leading to a severe economic recession in 2009. As a result, annual retail food price inflation peaked at 5.5% in 2008 before falling to 1.8% in 2009 and 0.8% in 2010 ( Figure 8 ). According to USDA, U.S. food price inflation is projected in the 2% to 3% range in 2015 ( Table 4 and Figure 8 ). The 11-month MA series reveals three recent pronounced inflationary-deflationary trends for retail food prices that have occurred since 2005: 
1. a strong upward inflationary trend that began at the end of 2005 and persisted through June 2008—in line with the demand-driven price rises in global markets for agricultural commodities as well as for energy, transportation, and raw materials; followed by a severe deflationary price pattern from late 2008 until mid-2009, driven by the U.S. and global financial crisis of 2008 and its aftermath; 2. another upward trend starting in late 2010 as U.S. and global economic conditions slowly improved, followed by a decline in inflationary pressure in mid-2011 into 2013—again due largely to sluggish economic growth, stagnant wages, and persistently high unemployment, which combined to weaken consumer purchasing power; and finally 3. food price inflation returning in 2014 due to a strengthening U.S. economy and strong employment gains; followed once again by an apparent economic downturn heading into 2015. At-Home Versus Away-from-Home Food Price Inflation

As shown earlier ( Figure 6 ), At-Home food prices are substantially more volatile than Away-from-Home food prices (see also Table 1 ). Price Inflation Escalator Clauses Often Respond with a Lag

Many wages and salaries, as well as federal programs (including several domestic food assistance programs), are linked to price inflation through escalation clauses in order to retain their purchasing power. However, even for households with escalation clauses that adjust incomes or benefits for price inflation, there is a time lag between the time the price inflation is measured and the time when the wage or program benefit is adjusted upward to compensate.
The heightened price volatility of global commodity markets in 2008, the devastating U.S. drought of 2012, China's growing demand for international commodities, and almost routine media reports of daunting world population growth all raise the specter of food price inflation and generate many questions about farm and food price movements. Understanding food price changes and their effects on consumers is an important matter for Members of Congress and their constituents. This report provides information on the current status and outlook for U.S. food prices, measuring their changes and how such changes relate to U.S. consumers.
Despite the hype associated with media coverage of international catastrophes, historical evidence suggests that prices for retail food products are driven more by consumer demand (strongly linked to general economic conditions), than by price changes in raw commodity markets, although this linkage varies with the degree of raw commodity content in the retail product. For a discussion of the relationship between farm and retail prices, and the major factors influencing farm-level and wholesale food prices, see CRS Report R40621, Farm-to-Food Price Dynamics.
During the 1991 to 2006 period, U.S. food prices were fairly stable—annual food price inflation, as measured by the Consumer Price Index (CPI) for All Food (excluding alcoholic beverages), averaged a relatively low 2.5%. However, several economic factors emerged in late 2005 that began to gradually push market prices higher for both raw agricultural commodities and energy costs, and ultimately retail food prices. U.S. food price inflation increased at a rate of 4% in 2007 and at 5.5% in 2008—the highest since 1990 and well above the general inflation rate of 3.8%. The situation of sharply rising prices came to a sudden halt in late 2008, when the financial crisis led to a severe global economic recession. Annual food price inflation dropped to 1.8% in 2009 and 0.8% in 2010, driven by the global financial crisis and its aftermath. In 2011, improving U.S. and global economic conditions led to a 3.7% rise in average food prices. However, since 2012, food price inflation has averaged 2.5%—due in part to continued sluggish economic growth and stagnant wages, which combined to weaken consumer purchasing power. The U.S. Department of Agriculture (USDA) projects that annual U.S. food price inflation will be in the 2% to 3% range in 2015 compared with 2.4% in 2014.
For households with low disposable income levels where food expenditures are a large share of the budget, rising food prices result in diminished purchasing power and may force difficult budgetary tradeoffs. To help food-deficient households during periods of rising prices, many domestic food assistance programs are linked to price inflation through escalation clauses, in order to retain consumer purchasing power during periods of rising food prices. However, even for programs with escalation clauses, a time lag usually occurs between the time the price inflation is measured and the time when the wage or program benefit is adjusted upward to compensate.
The All-Food CPI has two components—Food-at-Home and Food-Away-from-Home. The Food-at-Home CPI is most representative of retail food prices and is significantly more volatile than the Food-Away-from-Home index. However, both indexes, Food-at-Home and Food-Away-from-Home, are projected at 2% to 3% for 2015.