Monday, July 28, 2008

What's Driving Food Prices?

Farm Foundation What's Driving Food Prices Purdue UniversityAccording to a new report prepared by Purdue University economists for the Farm Foundation, three broad sets of forces are driving food price increases: global changes in production and consumption of key commodities, the depreciation of the U.S. dollar, and growth in the production of biofuels.
“Today’s food price levels are the result of complex interactions among multiple factors. However, one simple fact stands out: economic growth and rising human aspirations are putting greater pressure on the global resource base,” says Farm Foundation President Neilson Conklin."
The short answer really seems to be the high price of oil.
"The ethanol blender credit, tariff and Renewable Fuel Standard are factors causing increased corn price, but quantitatively most of the increase has been driven by higher oil prices."
Two important notes from the report (pdf) are of significant interest:
"Most of the corn price increase is due to the higher oil price—not the subsidy... But removing the subsidy would not return us to corn prices seen over the past decade unless crude oil prices fell as well."
Source: Farm Foundation

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1 comment:

Unknown said...

This is a great post! I'm really hoping this study is picked up by the media and spread far and wide! Bob Dinneen, president of the Renewable Fuels Association mentioned it in a counter-point article in USA Today. It can be found here.