Inflation, Deflation and Thanks-Flation

The cost of Thanksgiving dinner looks to have risen only slightly this year despite a sharp rise in general food prices. Turkey prices are down a touch ahead of November, but consumers may want to go easy on the butter.

A Look at Thanksgiving Food Inflation Rising food prices have been a major driver of inflation over the past year. Prices for food at home—essentially food bought from a grocery store—has risen 3.3 percent since last October, nearly double the pace of overall inflation. So are consumers going to be cringing at the checkout line after completing their Thanksgiving shopping?

Meat prices have risen faster than any of the six major grocery categories since last October, with the CPI’s meats, poultry, fish & eggs index up 8.3 percent. Price increases, however, have varied greatly across meat types. Beef and veal prices have risen a whopping 17.8 percent from a year ago as years of drought conditions have left cattle herds at the lowest level since the USDA began collecting data in 1973. Similarly, pork prices are up 9.8 percent as a virus killed many young pigs earlier in the year. The cost of poultry, excluding chicken, on the other hand, is down slightly heading into the main turkey-buying season. This comes despite a run-up in wholesale turkey prices (top chart). Turkey production is estimated by the USDA to have fallen 2 percent this year to the lowest level since 1985, leading to a 12.8 percent increase in wholesale prices for slaughter turkeys.

Luckily for consumers, rising wholesale prices are not always passed directly to shoppers. Instead, stores will often sell turkeys at cut-rate prices in order to lure shoppers into buying the rest of their Thanksgiving items at that store. In fact, despite being the biggest months in terms of demand, turkey prices for consumers typically fall in November and December.

A look at other items that many shoppers will have on their Thanksgiving table shows consumers will likely be paying more for a few key items, while catching breaks on others (middle chart). Planning on using butter when prepping your turkey or eating it with rolls? You may want to think about switching to olive oil or margarine as butter prices are up 29.8 percent from last year. If you’re bringing a bottle of wine to your host, expect to pay just a little bit more than last year. After jumping 4.6 percent ahead of last November, fresh vegetable prices are down 2.6 percent over the past 12 months, although canned and frozen vegetables, on which consumers spend less of their budgets, are up slightly.

An informal survey by the American Farm Bureau Federation, on specific items likely to be on tables this Thursday, shows the cost of a Thanksgiving dinner has risen only 0.8 percent —a relative bargain compared to broader food inflation this past year (bottom chart). And while the overall cost of Thanksgiving dinner will still cost consumers a little more this year, it will at least be cheaper to travel to family and friends, with gasoline and airfares down 5.0 percent and 2.8 percent, respectively.