THE TRUTH ABOUT FOOD PRICES FINALLY SURFACING

Apr, 12, 2011  |  Today's News

Slowly but surely, the truth about food prices is making its way into mainstream media. No doubt corn prices are high, and the basic economic principles of supply and demand are the drivers of that situation. However, as you all know, corn prices don’t directly correlate to prices at the grocery store.

Here is a small sample of  articles have affirmed what we’ve known all along.

In the article Penn State ag economist says rising food prices not the farmers' fault, the author writes:

James Dunn, professor of agricultural economics, said prices for corn, wheat, soybeans and just about all large-production crops are higher than they were one year ago. He points to a long-term increase in global demand as the most salient of several factors.

 

Dunn cautioned that the current high food prices originate at the farm level, but few people buy food at the farm level. Most of the modern American food dollar goes to processing, transportation and marketing and not to the producers. So, rising farm prices won't hit all foods equally.

 

"The fact that corn prices are doubled doesn't mean that foods made from corn will double," he said. "In fact, the basic commodities are a relatively small portion of retail food prices. Labor, packaging, transportation and processing represent the majority of your food prices, and those don't change as rapidly as farm commodities.

 

In the Washington Post article Experts say energy, weather, unrest more likely responsible for higher food costs than farmers, the author writes:

But experts say those prices have little to do with what shoppers pay at the grocery store, and farmers and ethanol producers aren't responsible for recent increases in the cost of groceries.

 

"It's a whole slew of things that have influenced that price," said Chad Hart, an agricultural economist at Iowa State University. He ticked off some of them: "When you look at the cost of our food, it is related to the cost of corn, soybeans and wheat and cattle but also the cost of oil, gas, diesel and unrest in other parts of the world."

 

All of those factors mean consumers may have more to complain about for a while. Corinne Alexander, an agriculture economist from Purdue University, predicted food inflation will average between 4 percent and 4 ½ percent this year. Normal food inflation is about 2 ½ percent, she said.