Causes of Rising Food Prices

Rising food prices are drawing increased attention worldwide.  A variety of factors are contributing to the increases, according to the Food and Agricultural Organization (FAO) of the United Nations.  The report cites weather-related production shortfalls, declining stock levels, increased transportation costs, and the changing structure of demand caused by economic growth in emerging countries, as well as the emerging biofuels market and the operations of financial markets.

Scott VanderWal, president of the South Dakota Farm Bureau, points out that export embargos, energy increases, marketing costs and the decreasing value of the US dollar are all affecting food prices.  He adds, “The value that farmers receive for their products makes up only twenty to twenty-five percent of the food dollar. There are numerous other factors beyond commodities that are also contributing to food prices here in the United States.”

“The role of biofuels has been debated, but the facts indicate that ethanol demand is only one of many causes contributing to higher food prices,” said VanderWal.  According to the American Farm Bureau Federation, factors contributing to increased food prices include labor (40-45 percent of the food dollar), higher energy and transportation costs (5-8 percent), packaging ( 6-8 percent), profits for processors, retailers and restaurants (4-5 percent), and other marketing costs (20-25 percent).

“A set of short- and long-term issues are all at play right now,” added VanderWal.  “The answer is to allow and encourage the American farmer to respond to market signals through increased productivity.”

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