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Agricultural News

Will U.S. Food Prices Follow Global Trend and Rise?

Thu, 08 Sep 2011 12:55:40 CDT

Will U.S. Food Prices Follow Global Trend and Rise? Driven by higher commodity prices, global food prices soared to record highs in 2011. Higher food prices are straining the household budgets of global consumers, especially in poorer nations where food spending can account for almost half of household expenditures.

World populations are experiencing some modest relief as global food prices have eased since peaking in February, yet U.S. food prices have climbed higher in recent months. In the latest issue of the Main Street Economist, Omaha Branch Executive Jason Henderson examines global and U.S. food price trends, as well as the impacts on low-income populations.

"Low-income populations across the globe bear the biggest burden from higher food costs," said Henderson. "Even in the U.S., low-income populations spend roughly a third of their income on food."

Henderson explains that differences in world and U.S. food consumption patterns underlie the divergence between global and U.S. food prices. Although commodity prices have driven recent global food price trends, the prevalent consumption of processed and prepared foods means that wages and labor markets more heavily influence U.S. food prices.

In more affluent nations, people eat more processed and packaged foods, and with additional processing, commodity prices play a smaller role in the final retail food dollar. At the same time, labor has emerged as the single largest cost for U.S. foods.

"In the U.S., major swings in inflation often coincide with shifts in wages the same is true for food prices," said Henderson.

Due to the significance of labor costs, Henderson notes that global and U.S. food prices may follow different trends in the future. Global food prices will continue to be shaped more by future commodity prices, while U.S. food prices may be driven more by wages and economic growth. Even if commodity prices fluctuate at elevated levels, modest wage growth will likely temper any shifts in U.S. food prices.

Click here to see a copy of the complete article.



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