The Cost of Food

A close look at the cost of food these days is enough to produce a headache and raise one’s blood pressure. But what’s causing food prices to increase?

A new report, commissioned by Farm Foundation, examines the complex and multiple factors that influence food prices. “What’s Driving Food Prices?” was written by Purdue University economists Wallace Tyner, Christopher Hurt and Philip Abbott, and it identifies three factors behind increasing food prices. The report lists changes in world production and consumption of key commodities; the depreciation of the U.S. dollar; and the growth of biofuel production as the forces driving food costs.

“We made no attempt to calculate what percentage of price changes are attributable to the many disparate causes and, in fact, think it is impossible to do so,” says Tyner, the lead author of the report. “But examining the interplay of the forces driving food prices gives a clearer picture of what has been happening.”

Tyner is an energy and policy economist, most recently specializing in biofuels policies. Hurt works in analysis of commodity markets and Abbott in international trade and macro factors.

“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 difficult challenge for public and private leaders is to identify policy choices that help the world deal with the very real problems created by today’s rising food prices without jeopardizing aspirations for the future.”

The full report can be downloaded from Farm Foundation’s Web site at www.FarmFoundation.org/news/templates/template.aspx?articleid=404&zoneid=26.