Cheese Reporter, 12-24-2021

The folks at Merriam-Webster (which describes itself as “America’s leading provider of language information”) have declared “vaccine” to be their “Word of the Year” for 2021, following up on their declaration of “pandemic” as the word of the year in 2020.

While vaccine no doubt benefitted from generating headlines, and controversy, since the beginning of 2021 (the first COVID-19 vaccine in the US was administered a year ago this month, and vaccines continued to be rolled out throughout 2021), another word seems to be garnering as much if not more attention here in the final weeks and months of the year: inflation.

The recent concerns over inflation stem, at least in part, from the federal government’s monthly Consumer Price Index report. Last month, for example, the US Bureau of Labor Statistics reported that the all items index rose 6.2 percent for the 12 months ending in October 2021, the largest 12-month increase since the period ending November 1990.

And then earlier this month, the BLS reported that the all items index rose 6.8 percent for the 12 months ending in November 2021, the largest 12-month increase since the period ending June 1982.

So these are undoubtedly inflationary times, which is something not everyone is all that familiar with. That’s fairly obvious, since the CPI statistics indicate that inflation hasn’t been this bad in many years.

These CPI figures apply to all items, and in the last couple of months the BLS has noted that the CPI increases were broad-based, with increases in the indexes for energy, shelter, gasoline, used cars and trucks, and new vehicles among the larger contributors.

Oh, and also food. In November, the CPI for all items stood at 277.9 (1982-84=100), up 6.8 percent from November 2020, while the CPI for food was 285.5, up 6.1 percent from November 2020, and the CPI for food at home was 266.4, up 6.4 percent from a year earlier.

Yes indeed, these are inflationary times for the food industry, with the CPI for meats, poultry, fish and eggs up 12.8 percent, to 299.2, for the year ending in November 2021, the index for cereals and bakery products up 4.6 percent, to 295.9, and the index for fruits and vegetables up 4.0 percent, to 318.4.

But there’s a notable exception to this food price inflation: dairy products. In November, the CPI for dairy and related products was 233.2, up just 1.6 percent from November 2020. So not only is the dairy CPI well below other food categories, it’s also increasing at a rate well below other food sectors.

This prompted us to wonder both about the past and about the future, from the perspective of dairy price inflation.

As far as the past is concerned, thanks to statistics provided by USDA’s Economic Research Service, we went back to 1974 and looked at changes in the CPI for all food, food at home and dairy products, among other things.

If nothing else, these figures help illustrate how severe inflation was, particularly in the 1970s and the early 1980s compared to roughly the past 30 years. Just from 1974 through 1981, the CPI for food at home posted increases of 14.9 percent in 1974, 8.2 percent in 1975, 10.5 percent in 1978, 10.8 percent in 1979, 8.1 percent in 1980 and 7.2 percent in 1981.

Meanwhile, during that same period, the CPI for dairy products increased 18.6 percent in 1974, 8.1 percent in 1976, 6.8 percent in 1978, 11.6 percent in 1979, 9.8 percent in 1980 and 7.2 percent in 1981.

But after rising 6.5 percent in both 1989 and 1990, the CPI for food at home has posted considerably more modest increases almost every year over the past three decades. Specifically, from 1991 through 2020, the CPI for food at home posted just one increase of more than 5 percent; that was in 2008, when the CPI for food at home jumped 6.4 percent from 2007. And there were just two increases of more than 4 percent during that period: 4.2 percent in 2007 and 4.8 percent in 2011.

The dairy CPI during that 1991- 2020 period posted six increases of 5 percent or more, including an 8.0-percent rise in 2008. But the last of those increases was in 2011, when the dairy CPI rose 6.8 percent.

And in the five years prior to last year’s 4.4 percent increase, the dairy CPI fell 1.3 percent in 2015, declined 2.3 percent in 2016, rose just 0.1 percent in 2017, fell 0.5 percent in 2018 and increased 1.0 percent in 2019. Sort of the opposite of “inflationary.”

So what does the future look like for the dairy CPI, and for the CPI for food at home? According to the latest monthly ERS Food Price Outlook report, which was released Tuesday, the CPI for food at home will rise 2.5 to 3.5 percent this year and 1.5 to 2.5 percent next year, while the dairy CPI will increase 1.0 to 2.0 percent this year and then in 2022 will range from a decline of 0.5 percent to an increase of 0.5 percent.

The dairy CPI’s current situation and 2022 prospects contrast sharply with many other food categories, particularly meats, poultry, fish and eggs. As noted earlier, the CPI for that category was 299.2 in November, so it’s already considerably higher than the dairy CPI.

And after rising 6.0 to 7.0 percent this year, the CPI for meats, poultry and fish is projected to increase 2.0 to 3.0 percent next year.

Eggs, meanwhile, match dairy’s 2022 forecast range of minus 0.5 percent to plus 0.5 percent, but that’s on top of this year’s increase of 3.5 to 4.5 percent.

Yes, inflation is and will remain rampant, except when it comes to the dairy case.