Food Prices Explained

Global Supply

As more countries emerge as large producers of crops, global supply has an impact on food prices. Regardless of domestic supply, diminished soybean production in Brazil or increased wheat harvests in the Black Sea will drive global food prices.

International Trade Relationships

Government policies, such as tariffs to support domestic production, can reduce competition, limit supplies available for international trade and impact prices.

Disease

Diseases and infestations can cause shortages in grains, which reduce food supply for livestock. Diseases can also negatively impact livestock, resulting in lower demand for feed grain.

Currency Fluctuations

The strength of the U.S. dollar, relative to other currencies, has an impact on all commodity prices. Raw materials are almost always priced in U.S. dollars, so a producer often needs to adjust prices based on production costs in local currency.

Transportation

High oil prices can drive up the costs of bringing food to market and these costs are passed along to consumers.

Transportation shortages can also raise food prices.

Planted & Harvested Acreage

Farmland is being lost at an alarming rate due to development and other factors. Additionally, farmers need to allocate their limited acres to a variety of crops, meaning pricing relationships between grains will change over time.

Weather

Drought, flooding and freezing reduce supply, which can negatively impact the production of key grains like corn and soybeans and cause dramatic price increases in essential crops.