Department of Agricultural EconomicsPurdue University

Food Price Outlook

Corinne Alexander

cealexan@purdue.edu Purdue University August 19, 2011

Department of Agricultural EconomicsPurdue University

1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011

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Food Price IndexMeat Price IndexDairy Price IndexCereals Price IndexOils Price IndexSugar Price Index

FAO World Food Price Index: Annual

Department of Agricultural EconomicsPurdue University

1/2009

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1/2011100.0

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450.0 Food Price IndexMeat Price IndexDairy Price IndexCereals Price IndexOils Price IndexSugar Price Index

FAO World Food Price Index: Monthly

Department of Agricultural EconomicsPurdue University

jan-09

march-09may-09

jul-09sept-09

nov-09jan-10

mar-10may-10

july-10sept-10

nov-10jan-11

mar-11may-11

jul-11-3.0%-2.5%-2.0%-1.5%-1.0%-0.5%0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%5.5%6.0%6.5%

Retail Food Price Changes,Year-over-Year Annual Rates, By Months, 2009- July 2011

Year

-Ove

r-Ye

ar %

Cha

nge

CPI-U

Food at Home

Food Away

Department of Agricultural EconomicsPurdue University

2003 2004 2005 2006 2007 2008 2009 2010 407250.0

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Average Annual Food Prices: 2003-2011(Calculated as Average of Monthly Year-over-Year Percent

Changes)

Food away

Food at home

Annu

al P

erce

nt C

hang

e

http://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/Data/cpiforecasts.htm

Department of Agricultural EconomicsPurdue University

Romaine lettuceTomatoes, field, lb.

Oranges, Navel, Val., lb.Rice, white, long grain, uncooked, per lb.

Natural gas 40 thermschicken breast, boneless

Ham, boneless, lbPeanut Butter, all sizes, lb.

Electricity per kwhChicken, fresh, whole, lb.

Pork Chops, center cut bone-inTurkey, frozen, whole, lb.

Cheese, Am. Proc., lb. Margerine, stick, lb.

Bananas, lb.Lettuce, iceberg, lb.

Choc. Chip Cookies, lb.Steak, round, Choice, boneles

Apples, Red. Del., lb.Potatoe chips, 16 oz.

Chuck Roast, Choice, bnls. LbAll ground beef, per lb.

Ice Cream, prepak, bulk, 1/2galRound Roast, Ch., boneless

Flour, white, lbMilk, fresh, whole, fort., gal.

Sugar, white, all sizes, lbOrange Juice, Froz. Conc. 12oz

Bread, white, lb.Bacon, sliced, lb.

Eggs, grade A, large, doz.Ground Beef, 100% beef, lb.

Spaghetti, macaroni, lb.Butter, salted, AA, stick, lb.

Cheddar cheese, natural, per lbPotatoes, white, lb.

Gas, unleaded, reg, gal.Coffee, ground rst., all sizes, lb

Grapes, Thomp. Seedl. Lb.

-15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55%

Retail Food Prices: Percentage Changes, July 2010 to July 2011

Source: US Bureau of Labor Statistics, Consumer Price Index, National City Average

Department of Agricultural EconomicsPurdue University

Changes in Food Price Indexes, 2008 through 2012      

Item Relative AnnualAnnualAnnu

alForecas

t Forecast

importance 1 2008 2009 2010 20112 20122

Consumer Price Indexes Percent Percent changeAll food 100.0 5.5 1.8 0.8 3.0 to 4.0 2.5 to 3.5 Food away from home 43.1 4.4 3.5 1.3 3.0 to 4.0 2.0 to 3.0 Food at home 56.9 6.4 0.5 0.3 3.5 to 4.5 3.0 to 4.0 Meats, poultry, and fish 12.5 4.2 0.5 1.9 5.0 to 6.0 4.5 to 5.5

Meats 7.9 3.5 -0.6 2.8 6.0 to 7.0 4.5 to 5.5 Beef and Veal 3.7 4.5 -1.0 2.9 7.0 to 8.0 6.0 to 7.0 Pork 2.5 2.3 -2.0 4.7 6.5 to 7.5 4.0 to 5.0 Other meats 1.7 3.1 2.3 -0.1 3.0 to 4.0 2.5 to 3.5 Poultry 2.4 5 1.7 -0.1 2.5 to 3.5 3.0 to 4.0 Fish and seafood 2.2 6 3.6 1.1 5.5 to 6.5 4.0 to 5.0 Eggs 0.7 14 -14.7 1.5 4.5 to 5.5 3.0 to 4.0 Dairy products 6.1 8 -6.4 1.1 5.0 to 6.0 3.0 to 4.0 Fats and oils 1.7 13.8 2.3 -0.3 6.5 to 7.5 4.5 to 5.5

Department of Agricultural EconomicsPurdue University

Changes in Food Price Indexes, 2008 through 2012      

Item Relative AnnualAnnualAnnu

alForecas

t Forecast

importance 1 2008 2009 2010 20112 20122

Consumer Price Indexes Percent Percent change Fruits and vegetables 8.4 6.2 -2.1 0.2 3.5 to 4.5 2.0 to 3.0

Fresh fruits & vegetables 6.4 5.2 -4.6 0.6 3.5 to 4.5 2.0 to 3.0

Fresh fruits 3.3 4.8 -6.1 -0.6 2.0 to 3.0 1.5 to 2.5

Fresh vegetables 3.2 5.6 -3.4 2.0 4.5 to 5.5 2.5 to 3.5 Processed fruits & vegetables 1.9 9.5 6.6 -1.3 1.5 to 2.5 3.0 to 4.0

Sugar and sweets 2.2 5.5 5.6 2.2 2.5 to 3.5 2.0 to 3.0 Cereals and bakery products 7.9 10.2 3.2 -0.8 3.5 to 4.5 2.5 to 3.5

Nonalcoholic beverages 6.7 4.3 1.9 -0.9 2.0 to 3.0 1.5 to 2.5

Other foods 10.7 5.2 3.7 -0.5 2.5 to 3.5 2.0 to 3.0

Fruits and vegetables 8.4 6.2 -2.1 0.2 3.5 to 4.5 2.0 to 3.0

Fresh fruits & vegetables 6.4 5.2 -4.6 0.6 3.5 to 4.5 2.0 to 3.0

Fresh fruits 3.3 4.8 -6.1 -0.6 2.0 to 3.0 1.5 to 2.5

Fresh vegetables 3.2 5.6 -3.4 2.0 4.5 to 5.5 2.5 to 3.5

Department of Agricultural EconomicsPurdue University

http://www.ers.usda.gov/Publications/ERR114/ERR114.pdf

Ingredient Prices UpCommodity

Price Today

2010 2009 2008 2007

Corn $6.99 $4.12 $3.24 $5.75 $3.41Crude Oil $82.50 $75.4

5$72.85 $115 $68.6

0Soybeans $13.50 $10.3

4$9.57 $12.94 $8.49

Soybean Oil

$0.55 $0.41 $0.36 $0.53 $0.36

Wheat $7.11 $6.56 $4.69 $8.75 $7.26Live Cattle $115.2

0$96.2

5$88.83 $100.7

0$94.3

8Lean Hogs $86.65 $75.9

8$46.95 $75.10 $70.6

5Milk $19.00 $15.3

7$12.90 $17.20 $19.8

3

Late August CME Nearby Futures Quotes

Ingredient Prices Up

Commodity

Price Today

2010 2009 2008 2007

Coffee $2.65 $1.77 $1.21 $1.42 $1.13Sugar $0.29 $0.20 $0.24 $0.13 $0.09Oats $3.45 $2.65 $2.11 $3.45 $2.42Orange Juice

$1.74 $1.38 $0.90 $1.09 $1.25

Cocoa $2,985

$2,698

$2,772

$2,864 $1,868

Late August CME Nearby Futures Quotes

2012 Food Price Prediction• ERS predicts (June 25, 2011)

• 3.0 to 4.0% for 2011• 2.5 to 3.5% for 2012

• Corinne• 3.5 to 5.0% for 2011• 3.0 to 4.0% for 2012

• Big unknowns are• Weather and it’s impact on crop and livestock

production• Global economy• Individual categories will see sharp increases

• Pasta, beef, … Department of Agricultural EconomicsPurdue University

I think most farmers here know, particularly if you’re in livestock farming, right now the costs of feed keep on going up and the costs of food as a consequence are also going up.  Only about 4 percent of that is accounted for by corn being diverted into ethanol, but as you see more and more demand placed on our food supplies around the world — as folks in China and folks in India start wanting to eat more meat and commodity prices start going up, it’s going to be important for us to figure out how can we make biofuels out of things that don’t involve our food chain.

-Obama, 8/17/2011

Department of Agricultural EconomicsPurdue University

Questions?