USDA Report on Factor Affecting Food Prices

Food commodity prices are determined by the complex interaction of many economic forces. This report from the USDA provides a good comprehensive look at those factors.

Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices

By Ronald Trostle

Outlook Report No. (WRS-0801) 30 pp, May 2008

World market prices for major food commodities such as grains and vegetable oils have risen sharply to historic highs of more than 60 percent above levels just 2 years ago. Many factors have contributed to the runup in food commodity prices. Some factors reflect trends of slower growth in production and more rapid growth in demand, which have contributed to a tightening of world balances of grains and oilseeds over the last decade. Recent factors that have further tightened world markets include increased global demand for biofuels feedstocks and adverse weather conditions in 2006 and 2007 in some major grain and oilseed producing areas. Other factors that have added to global food commodity price inflation include the declining value of the U.S. dollar, rising energy prices, increasing agricultural costs of production, growing foreign exchange holdings by major food importing countries, and policies adopted recently by some exporting and importing countries to mitigate their own food price inflation. (Access the complete report here.)