1

Food commodity prices: History & prospects

Ron TrostleEconomic Research Service

U.S. Department of Agriculture

?

USDA Outlook ForumFebruary 20, 2014

2

0

50

100

150

200

250

19

80

M1

19

82

M1

19

84

M1

19

86

M1

19

88

M1

19

90

M1

19

92

M1

19

94

M1

19

96

M1

19

98

M1

20

00

M1

20

02

M1

20

04

M1

20

06

M1

20

08

M1

20

10

M1

20

12

M1

20

14

M1

Index: January 2002 = 100

Source: International Monetary Fund: International Financial Statistics. January 2014

Food commodity prices since January 1980:Reversal of a 22-year downward trend in 2002

Down 1/3 in 22 yearsMore than doubled

in 10 years

3

0

50

100

150

200

250

Jan 2002 Jan 2004 Jan 2006 Jan 2008 Jan 10 Jan 12 Jan 14

Index: January 2002 = 100

3

Food-commodity prices since January 2002:an upward trend and two spikes

Up 130 %

Down 33 %

Up 60 % June 2008

December2008

April2011

April 2007

June 2010

Down 15 %

Source: International Monetary Fund: International Financial Statistics. January 2014

Down 7.6 %

4

0

50

100

150

200

250

300

350

2002 2004 2006 2008 2010 2012

Food commodity price index

4 Crops

3 Meats

Index: January 2002 = 100

Livestock prices have become a moresignificant factor in food commodity prices1/

1/ Meat: index of beef, pork & chicken prices; weighted by world consumption. Crops: index of wheat, rice, corn, & soybeans prices, weighted by trade shares.

Source: International Monetary Fund: International Financial Statistics. January 2014

5

Factors contributing to fluctuations in food commodity prices Economy wide Ag sector

> Exchange rate (LT & ST)

> Oil price

> Economic growth

> Increasing population

> Cost of energy

> Weather production

> Stock-to-use ratio

> Exporters’ policy response

> Importers’ policy response

> Meat & dairy consumption

> Global biofuel production

> Productivity growth

> Natural resource constraints

Short-termdisruptions

Long-termtrends

6

-4

-3-2

-1

0

12

3

4

56

7

8

1990 1995 2000 2005 2010 2015 2020

Percent

World

United States

Source: USDA Agricultural Projections to 2023, February 2014.

Developed countries

Developing countries

Economic growth (GDP)

77

50

60

70

80

90

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

Per capita production

International Meat: Sum of reporting countries1,2

Production and per capita production

Exponential trend growth rates

1975-90 90-13 14-23Production 3.1 2.3 1.9Population 1.7 1.2 1.0Per capita 1.4 1.1 0.9 production

1 Total meat = beef + pork + chickens & turkeys.2 Data are not reported in USDA’s PS&D database for some small countries; therefore data are not a global total.

Source: Compiled from USDA’s PS&D Database & Baseline Projections, Feb 2014

50.2 lbs/cap

80.0 87.4 lbs/cap

88

70

90

110

Jan-70 Jan-75 Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15

Exchange rate index: 2005 = 100 4-crop price index: 2002 = 100

1/ Real U.S. agricultural trade-weighted dollar exchange rate, using U.S. agricultural export weights, based on 192 countries.

Source: http://ers.usda.gov/data-products/agricultural-exchange-rate-data-set.aspx

U.S. agricultural trade-weighted dollar exchange rate 1/

Jan. 2002

Exchange rate

Four-crop price index

99

70

90

110

Jan-70 Jan-75 Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10 Jan-15

40

90

140

190

240

290

340

Exchange rate index: 2005 = 100 4-crop price index: 2002 = 100

1/ Real U.S. agricultural trade-weighted dollar exchange rate, using U.S. agricultural export weights, based on 192 countries.

Source: http://ers.usda.gov/data-products/agricultural-exchange-rate-data-set.aspx

U.S. agricultural trade-weighted dollar exchange rate and the 4-crop price index 1/

Jan. 2002

Exchange rate

Four-crop price index

10

70

80

90

100

110

120

130

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Index values, 2005=100

1/ Real U.S. agricultural trade-weighted dollar exchange rate, using U.S. agricultural export weights, based on 192 countries.

Source: USDA Agricultural Projections to 2023, February 2014.

U.S. agricultural trade-weighted dollar exchange rate 1/

11

0

1

2

3

4

5

6

7

1990/91 1995/96 2000/01 2005/06 2010/11 2015/16 2020/21

Crop year

U.S. corn use projections:Corn-based ethanol expansion slowsBillion bushels

Feed use

Exports

Ethanol

Source: USDA Agricultural Projections to 2023, February 2014.

12

100

150

200

250

300

1970 1980 1990 2000 2010 2020

Production

Area

Yield

Total world grain & oilseeds1

Production, yield, area harvested .

Source: Compiled from USDA’s PS&D Database & Baseline Projections, Feb 2014

1 Oilseeds = soybeans + rapeseed + sunflowers

Index: 1970 = 100

Exponential trend growth rates: 1970-90 90-2013 2014-23Production 2.43 1.72 1.39

Yields 2.02 1.29 0.91Area 0.44 0.43 0.48

13

100

150

200

250

300

1970 1980 1990 2000 2010 2020

Production

Area

Yield

Population

Percap production

Total world grain & oilseeds1

Production, yield, area harvested, population & per cap production

Source: Compiled from USDA’s PS&D Database & Baseline Projections, Feb 2014

1 Oilseeds = soybeans + rapeseed + sunflowers

Index: 1970 = 100

Exponential trend growth rates: 1970-90 90-2013 2014-23Production 2.43 1.72 1.39

Yields 2.02 1.29 0.91Area 0.44 0.43 0.48

Population 1.74 1.25 0.98Per capita 0.68 0.46 0.41 production

14

100

150

200

250

300

1970 1980 1990 2000 2010

Total world grain & oilseeds1

Production

Source: Compiled from USDA’s PS&D Database & Baseline Projections, Feb 2014

1 Oilseeds = soybeans + rapeseed + sunflowers

Index: 1970 = 100

2013 increase was7.8 %

43-year trend is a 1.8 % annual increase

15

0%

5%

10%

15%

20%

25%

30%

35%

1970 1975 1980 1985 1990 1995 2000 2005 2010

0

50

100

150

200

250

Stocks / Use

Total world grain & oilseeds1

Stocks-to-use ratio

Source: USDA WASDE and PS&D Database: January 2014

1 Oilseeds = soybeans + rapeseed + sunflowers

Stocks:use ratio

16

0%

5%

10%

15%

20%

25%

30%

35%

1970 1975 1980 1985 1990 1995 2000 2005 2010

0

50

100

150

200

250

Stocks / Use 4-crop price index

Total world grain & oilseeds1

Stocks-to-use ratio and 4-crop price index

Source: USDA WASDE and PS&D Database: January 2014

1 Oilseeds = soybeans + rapeseed + sunflowers

Crop price index

Stocks:use ratio

17

0%

5%

10%

15%

20%

25%

30%

35%

1970 1975 1980 1985 1990 1995 2000 2005 2010

0

50

100

150

200

250

Stocks / Use 4-crop price index

Total world grain & oilseeds1

Stocks-to-use ratio and 4-crop price index

Source: USDA WASDE and PS&D Database: January 2014

1 Oilseeds = soybeans + rapeseed + sunflowers

Crop price index

Stocks:use ratio

Jan 2014

1818

0

2

4

6

8

10

12

14

16

1980/81 1985 1990 1995 2000 2005 2010 2015 2020

Corn, wheat, rice, and soybean prices projected to remain historically high

$ per bushel (per cwt for rice)

Corn

Wheat

Soybeans

Source: USDA Agricultural Baseline Projections to 2023, February 2014.

Rice

19

20

40

60

80

100

120

140

160

1990 1995 2000 2005 2010 2015 2020

$ per hundredweight, U.S. markets

Beef cattle: Steers, 5-area

Broilers: National composite

Hogs: National base

Livestock Prices

Source: USDA Agricultural Baseline Projections to 2023, February 2014.

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Conclusions

World production rose sharply in 2013 in response to high prices and good weather. Stocks have risen.

Expect prices to decline from recent peaks, but to remain historically high• Global economic recovery and renewed growth in demand for

crops, animal products, and energy• Slower productivity growth• Continued low value of the dollar• Much slower growth in global biofuels output

World ag production prospects• In short-run: production can respond to higher prices – if the

weather cooperates. • Over next 10 years, global production growth is projected to keep

pace with population.

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Why Have Food Commodity Prices Risen Again? http://www.ers.usda.gov/publications/WRS1103/

USDA Agricultural Projections to 2023http://www.ers.usda.gov/topics/farm-economy/agricultural-baseline-projections.aspx

Contact:

Ron Trostle

rtrostle@ers.usda.gov

202-694-5280

Related reports and contacts

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0

50

100

150

200

250

300

350

400

450

500

550

600

650

700

Jan 90 Jan 95 Jan 2000 Jan 05 'Jan 10

Crude oil

All commodities

Food commodities

Index: January 2002 = 100

Non-food commodity prices have risen even faster

Source: International Monetary Fund: International Financial Statistics. January 2014

2323

Factors that may influence future ag prices

• Economic growth & world economy• Global consumption & import demand• Weather / world ag production• Stock levels• Exchange rates• Energy & other non ag prices / Ag production

costs• Policy changes by food commodity exporters &

importers