USDA has reduced its 2010 food inflation forecast from 4 percent cited earlier to a range of 2.5 percent to 3.5 percent.

According to USDA's Economic Research Service, a further analysis of the Consumer Price Index shows that the same inflation range applies to both retail and foodservice food prices.

Food prices are expected to rise due to recovering global economies. That will lead to increased commodity and energy costs combined with stronger domestic and global food demand to push inflation up, notes USDA. Retail food price inflation in 2010, though not projected to be as strong as in 2008, will rebound from the 2009 level toward a moderate rate, just above the long-term historical average, note the economists.

The CPI for all food increased 0.2 percent from November to December 2009, decreased 0.1 percent from October to November and is now 0.5 percent below the December 2008 level. For the first time since 1959, the food CPI has been below the previous year's level for four consecutive months (September-December 2009), notes USDA. This is because cuts in meat, dairy and produce prices have dropped the food CPI to negative levels.

Beef prices decreased 0.5 percent in December. This was the 11th price decrease in the past 14 months, putting beef prices 4.7 percent below December 2008.

Pork prices were down 0.6 percent in December, the ninth price decrease in the past 12 months, and are now 7.8 percent below that of December 2008.

Poultry prices rose 0.2 percent in December but are now down 1.5 percent from last year at this time.

While retail meat prices are currently lower than one year ago, the resurgence in feed and energy costs may curtail the current deflationary period, USDA economists predict.

Source: USDA