U.S. food inflation parallels 70s on ethanol boom

[Andy R]

Here is an interesting article I was just reading and thought I would share:

By Christine Stebbins - Link to full article

CHICAGO (Reuters) - Rising U.S. food inflation, now a 25-year high, is reminiscent of the 1970s and will continue for the next five years due to growing world economies, increased food demand and a sharp expansion of corn-based ethanol production, a top food economist said on Friday.

"What happened in the early '70s and what is happening today is that we have moved food input price to a new plateau. Ultimately, the consumer is going to have to absorb those increased costs," said Bill Lapp, president of Advanced Economic Solutions, who on Thursday released a study that looked at food inflation data going back to the 1960s.

Futures prices on the Chicago Board of Trade, the benchmark for commodity grain and soy markets, have risen to multi-year highs this year. Wheat hit an all-time high of $9.81-3/4 a bushel just on Friday. Soybeans on Friday reached over $11.60 a bushel, a price not seen since 1973, and corn rose to $4.37-1/4 in February, the highest level in a decade.

"The underpinnings for the higher commodity prices are world economic growth, a weak dollar and increased use of our corn crop for the production of ethanol," Lapp told Reuters in an interview.

While most of the U.S. corn crop, or 43 percent is fed to livestock to produce meat, dairy products and eggs, an increasing percentage is being used to produce ethanol. Twenty-four percent of this year's corn crop will be turned into ethanol, up from just 14 percent two years ago.

The higher cost of raw commodities contributed to the Consumer Price Index for food, a broadly used gauge for inflation, which rose to an annual rate of 5.4 percent during the first 10 months of 2007, a level not seen since 1980, according to Advanced Economic's study.

"During the next five years, food inflation is forecast to increase by an average of 7.5 percent, well above the 2.3 percent average of the past 10 years.

Link to the rest of the article

 

[dumpster56]

Time to diet. You know the study about caloric restriction. Lets see go from 2500 K a day to 1600 and bingo you can actually save money!

 

[A854321]

Yes, just another reminder that one's personal inflation rate (standard of living depreciation) is higher than the CPI's - at least until it catches up.

CPI of 7.5% for 5 years? Ouch. {note to self: stock up on Top Ramen}

 

[MikeD]

{note to self: stock up on Top Ramen}

Even that's going up. At the Shopper's Food Warehouse (an appropriately dingy name for the discount food store around these parts) the cheapest brand of ramen went from 8 for a dollar to 7 for a dollar. I think that's about a 14% increase.

Mike D.

 

[Zathras]

Hopefully corn ethonal will disappear quickly once cellulousic ethonal is competitive.
The inflation due to transport costs on the other hand...