Study Offers Objective View of Food Price Drivers

Cindy Zimmerman

An agricultural public policy group is releasing a new study today that offers a comprehensive, objective assessment of the forces driving food prices.

Farm Foundation Food Price StudyThe Farm Foundation study “What’s Driving Food Prices?” was written by three Purdue University economists. Lead author Wally Tyner says that while ethanol demand is definitely the main reason for increased corn prices, the ultimate driver behind ethanol demand is higher oil prices.

“Crude oil’s strongest and most direct impact on food prices has been through its effect on the demand for biofuels,” Tyner said. “Higher oil price means higher gasoline price, higher gasoline price means more demand for ethanol because ethanol is a substitute for gasoline, and the higher ethanol demand means more demand for corn and more demand for corn means higher corn prices.”

The result has been that the price of crude oil and the price of corn are now linked, Tyner says, which is a revolution for global agriculture.

Farm Foundation 75th logoFarm Foundation president Neil Conklin says what the study shows is that today’s food price levels are the result of complex interactions among multiple factors, including global changes in production and consumption of key commodities, the depreciation of the U.S. dollar, and growth in the production of biofuels.

Farm Foundation is an independent group with a 75 year history that does no lobbying and has no allegiance to any particular agricultural commodity. Farm Foundation will host a free webinar on the report, July 30 at 1 p.m. EDT.

Read the full report here.

Ethanol, Farm Foundation, Food prices, News