L02Sep09.306 - Lecture 2 Global Food Price Dynamics Part 1:...

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Lecture 2 Global Food Price Dynamics Part 1: Historical Patterns* FRE 306
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Lec 2: Global Food Price Dynamics 2 Declining Prices of Food Commodities 1 Until ~2006, virtually all food commodities have shown long run (LR) trend declines in their real prices, at farm level Real Prices = Nominal prices adj. for inflation [= (Nom Price/CPI, current period)* (CPI, base per.)] Puts prices on a scale they would have been on if there were no inflation Widely used to find out “real” changes in economy Rate of decline ranges from small negative (less than 1%/yr) to negative 5%/yr (unusually rapid)
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Lec 2: Global Food Price Dynamics 3 Declining Prices of Food Commodities 2 Local examples, 1970s-1980s data (15-20 yrs) Apples: less than –1% (close to zero) for Macintosh, -2.5% for fresh Red Delicious apples (different varieties) Fresh fruit grown in BC generally experiences real price declines between -2 and -3 %/yr (15-20 yr period) Vegetables -2 to -4%/yr (California pricing, 15-20 yrs) Cereal prices decline in the lower end of range: -1 to -2 Livestock/cattle show rates of decline near -1 %/yr Same negative real price declines for rubber, trop. crops These observations apply to trends over 15+ years
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Lec 2: Global Food Price Dynamics 4 Trend Rates of Decline: Agric. commodity prices, 1960-2002 Bananas -0.52% Fishmeal -0.82% Rubber -2.51% Beef -1.65% Groundnut Oil -1.56% Sorghum -2.01% Cocoa -1.73% Jute -3.56% Soybean Oil -2.36% Coconut Oil -2.76% Maize -2.22% Soybeans -2.04% Coffee -1.75% Oranges -0.73% Sugar -1.57% Copra -2.60% Palm Oil -2.50% Tea -2.44% Cotton -1.96% Rice -2.54% Wheat -1.41% Longer Term International (WB) Data (C.L. Gilbert, 2006)
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Lec 2: Global Food Price Dynamics 5 Declining Prices of Food Commodities 3 Patterns may not be observed in shorter run, even to 5 years, due to dominance of short term factors
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This note was uploaded on 03/09/2010 for the course LFS FRE 306 taught by Professor Barichello during the Winter '09 term at The University of British Columbia.

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L02Sep09.306 - Lecture 2 Global Food Price Dynamics Part 1:...

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