The agricultural policy organization Farm Foundation, NFP released a new report today on What’s Driving Food Prices for 2011.
Foundation president Neil Conklin says the report is a follow up to similar studies they commissioned when prices were up in 2008 and 2009. “The purpose of the report this time is to provide both policy makers in the public sector and decision makers and stakeholders in the private sector with information to make difficult choices about food, agriculture and energy policies,” said Conklin. “This time we’ve tried to put some additional emphasis on the medium and long term implications of what’s going on.”
Listen to or download an interview with Neil about the report here: Neil Conklin Interview
Farm Foundation commissioned three Purdue agricultural economists to do the report – Phil Abbott, Chris Hurt and Wally Tyner. According to Tyner, they identified two major commodity demand shocks in 2011 – the use of corn for ethanol and Chinese soybean imports. “In 2005, we were using about 16 million acres to supply all of the ethanol in the United States and Chinese soybean imports,” he said. “In 2010, it took 46.5 million acres, an increase of 189%, just to satisfy those two demands.”
Listen to or download an interview with Wally about the report here: Wally Tyner Interview
“There was a dramatic increase in Chinese imports of soybeans between 2006 and now,” said Abbott. “China imports 86% of their use of soybeans and imported roughly 55 million tons in the last year.” He noted that 40 percent of the increase in Chinese soybean imports in recent years was for building stocks, which he estimates to be about 23% of their use right now, compared to five percent here in the United States.
Listen to or download my interview with Phil here: Phil Abbott Interview
Hurt says another major factor driving prices is market inelasticity, both on the demand and the supply side. “An area on the supply side that we’ve seen is land,” said Hurt. “Today there’s just not any crop land available to shift over to the high demand crops of corn and soybeans.”
Listen to or download my interview with Christ here: Chris Hurt Interview
The report also noted that with grain stocks much tighter, weather is a bigger concern now than it was when prices were up in 2008.