First, food prices comprise 14.14% of overall CPI. Breaking that number down, food at home is responsible for 8.53% while food away from home is responsible for 5.61%. Cereals and grains total a small portion of overall CPI, only accounting for 1.22%. However, grain prices will also have an impact on dairy (grains are fed to cows) and meats and poultry prices. However, these two categories account for .89% and 1.9% of total CPI respectively.
Let's take a look at the data.
Above is a chart of bakery and cereal product prices on a year over year and non-seasonally adjusted basis going back to the Great Depression (the non-seasonally adjusted data goes back far longer than the seasonally adjusted data). Notice that we've been through episodes of price spikes before, which is to be expected. This data set is especially vulnerable to natural events.
Above is a chart comparing bakery and cereal prices with CPI, both on a year over year and non-seasonally adjusted basis (bakery is blue, CPI is red). Notice there is a general, positive relationship between the two data sets, telling us that these bakery and cereal prices are important determinants in the CPI equation.
Above is a year over year chart of the year over year percentage change in bakery and cereal goods compared with the overall CPI. This is a seasonally adjusted series.
