CHAP2. Farm_Commodity_Prices_Boom_Presentation

CHAP2. Farm_Commodity_Prices_Boom_Presentation - Farm...

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1 Chapter 2 Farm Commodity Prices: Why the Boom and What Happens Now? Pat Westhoff Choice , the magazine of food, farm, and resource issues 2008 Q2 Introduction For many years, the price of food was a nonstory. Food price inflation was about the same as the general rate of inflation, and farm commodity market developments rarely drew the attention of those not directly involved in agriculture and the food industry. That has changed. Rising commodity prices and high food price inflation here and abroad have put agricultural commodity markets in the spotlight. The media are full of stories about the causes and impacts of the commodity boom. A search of “high food prices” using google news results in 38,978 records : --High food prices “here for the next decade” --Schools facing higher food prices --Food price warning for consumers --High food prices increase number of home gardens in US --Price increases push US soy beyond reach of poor --The Price of Rice Soars, and Haiti's Hunger Deepens However, some very simple economics may help us to understand some of the reasons for the increase in prices and to speculate about what might happen in the future. Five major grains Price increase 05/06-07/08 Q –Corn 113% –Wheat 92% –Rice 70% –Barley –Sorghum Soybean 77% Quantity change: world corn production increased by almost 12%, with increased production in the U.S. accounting form most of the change; global wheat and oilseed (soybean) production in 07 were less than in 2005
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2 Chapter 2 Market supply shifters: 1. Input (factor) prices (-) 2. Profitability (prices) of competing goods (-) 3. Prices of joint products (+) 4. Risk and uncertainty (-) 5. Technology (+) 6. Weather (+) 7. Government policy (+ and -) 8. Number of firms Market supply shifters (supply side factors) Weather: In all four exporters––the European Union, Australia, Ukraine
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CHAP2. Farm_Commodity_Prices_Boom_Presentation - Farm...

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