Department of Economics

Drivers of Food Prices

Chad Hartchart@iastate.edu

515-294-9911

Iowa Hunger SummitDes Moines, IowaOctober 14, 2008

Department of Economics

The Food Dollar

Source: USDA-ERS

Department of Economics

Farm Value in Individual Foods

Source: USDA-ERS

Farm share of retail price1 Food 1998 1999 2000

(Percent)  Milk, ½ gal. 41 39 34  Orange juice conc., 12 fl. oz. 38 37 33  Corn, 303 can (17 oz.) 23 22 22  Applesauce, 25-oz. jar 14 14 16  Tomatoes, whole, 303 can 7 7 7  Sugar, 1 lb. 32 31 27  Flour, wheat, 5 lbs. 20 18 19  Margarine, 1 lb. 26 17 15  Rice, long grain, 1 lb. 22 19 14  Peanut butter, 1 lb. 26 23 22  Potato chips, regular, 1-lb. bag 8 9 8  Chicken dinner, fried, frozen, 11 oz. 13 13 14  Potatoes, french fried, frozen, 1 lb. 11 11 10  Bread, 1 lb. 5 5 5  Corn flakes, 18-oz. box 4 4 41Computed from unrounded farm values.

Department of Economics

Factors Leading to Higher Commodity Prices

Source: USDA-ERS, Trostle, July 2008

Department of Economics

Events in 2007Droughts:

Northern Europe, Ukraine, Russia, Northwest Africa, Turkey, Australia, and Argentina

Increased export taxes:China, Argentina, Russia, Kazakhstan,

Malaysia, and Indonesia

Export restrictions:Argentina, Ukraine, India, Vietnam, Serbia,

Egypt, Cambodia, Indonesia, and Kazakhstan

Department of Economics

Commodity Price Ratios (Sept. 2006 =1)

0.5

1.0

1.5

2.0

2.5

3.0

3.59/1

/2006

11/1

/2006

1/1

/2007

3/1

/2007

5/1

/2007

7/1

/2007

9/1

/2007

11/1

/2007

1/1

/2008

3/1

/2008

5/1

/2008

7/1

/2008

9/1

/2008

Corn Soybeans Wheat Rice

Department of Economics

Crude Oil Prices

0

20

40

60

80

100

120

140

160

$ p

er

barr

el

Department of Economics

Commodity Price Indexes

Source: Internation Financial Statistics

Department of Economics

Thanks for your time!