If inflation picks up this year, food prices paid at the supermarket level will not be the cause. The USDA Economic Research Service expects them to rise only 1%, after a drop last year
One of the reasons is that a strong dollar will make food exports less likely:
Looking ahead to 2017, supermarket prices are expected to rise between 0.5 and 1.5 percent. Despite the expectation for declining prices in 2016, poultry, fish and seafood, and dairy prices are expected to rise in 2017. These forecasts are based on an assumption of normal weather conditions throughout the remainder of the year; however, severe weather or other unforeseen events could potentially drive up food prices beyond the current forecasts. In particular, the drought in California could have large and lasting effects on fruit, vegetable, dairy, and egg prices. Also, a stronger U.S. dollar could continue to make the sale of domestic food products overseas more difficult. This would increase the supply of foods on the domestic market, placing downward pressure on retail food prices.
Some of the major components of the “supermarket” basket are expected to drop this year:
Prices are expected to continue to decline in the near future. ERS now predicts beef and veal prices will decrease 6.75 to 5.75 percent in 2016 and decrease 2.0 to 1.0 percent in 2017.
ERS forecasts poultry prices to decrease 3.0 to 2.0 percent in 2016 but rise between 2.0 and 3.0 percent in 2017.
ERS forecasts egg prices to decrease 22.0 to 21.0 percent in 2016 and to decrease an additional 4.0 to 3.0 percent in 2017.
So, for many of these food, the two year drop is extreme.
2017 will be a good year for consumers, at least when it comes to eating.