The sources of variability in U.S. food prices

Abstract

Food prices surged in the United States and around the world between 2006 and 2008. Global increases have been attributed to income growth in the developing world, diversion of farm products from food to industrial usage, speculation in commodity markets, and energy price increases. Although pass-through of farm commodity price increases to retail prices may be mitigated by additional processing costs and food sector organizational structure, food prices in the U.S. have also recently outpaced general price increases. Time series analysis of factors influencing monthly food prices from 1970 through February 2009 suggest that innovations in farm prices and manufacturing wages, rather than consumer incomes or the prices of other food production inputs including fuel play the most significant role in determining food price changes.