Purdue University Weighs In on What’s Driving Food Prices

Biofuels & Climate Change

The Farm Foundation recently released a report prepared by Purdue University agricultural economists on the forces driving food price increases. They conclude that higher food prices are the result of the complex interaction of global changes in supply and demand for commodities, the depreciation of the U.S. dollar, as well as growth in production of biofuels.

According to the authors, these factors have combined to rapidly raise demand for U.S. grains beyond current production, leading to “the change from a surplus to a shortage era” and to increased prices. The authors also say that 75 percent of the demand for biofuels has come as the result of increased oil prices rather than the renewable fuel standard.

This is much the same conclusion drawn by researchers at Texas A&M University (see earlier post). It is also similar to the stated view of Bruce Babcock of Iowa state University’s Center for Agricultural and Rural Development during testimony to the Senate Committee on Homeland Security:
“Elimination of the [RFS] mandate would reduce expected ethanol production by about 4 percent … and the price of corn would fall by slightly more than 1 percent.”

The Purdue University researchers also highlight “the potentially large supply response that could result as farmers in developing countries increase production and productivity.”

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2 Responses to Purdue University Weighs In on What’s Driving Food Prices

  1. Karim Virani says:

    Why are the Oil Companies allowed to make such huge profits. Some of the billions should be diverted to subsidise the high cost of food, which is the direct result of the speculation driving up the oil price. It is not a supply and demand problem. With this in mind the oil companies who are benefitting should be made to pay. Why should we pay for high food prices caused by some unscupulous speculators profiting from our misery

  2. hungrybritain says:

    With the current uncertainties with food prices there is a greater need for us to conserve and be increasingly economical about food consumption at home. We have become wasteful as consumers of food and have never really had a need to feel otherwise before this crisis started. Blaming the rampant consumerism of the supermarkets has now irrelevant in this discussion. The situation now is that if we don’t change our food habits this situation could easily escalate completely out of control. The responsibility is now on us all to change our food buying and food consuming habits.
    Simple food saving tips are things we need to get used to and practice more regularly. Most of these are common sense and can be quite creative. You can find a list of free food saving tips at sites such as http://www.foodcrisis.co.uk amongst other similar sites as well.
    We all need to contribute to a fairer and more food wise program for ourselves.

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