Factors contributing
Download
1 / 36

his presentation yesterday - PowerPoint PPT Presentation


  • 322 Views
  • Uploaded on

Factors contributing to recent increases in food commodity prices Ron Trostle Economic Research Service USDA Economists Group June 10, 2008 1 Food commodity prices: up 220 % since January 2002: 70 % since January 2006

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'his presentation yesterday' - Albert_Lan


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Slide1 l.jpg

Factors contributing to recent increases in food commodity prices

Ron Trostle

Economic Research Service

USDA Economists Group

June 10, 2008

1


Slide2 l.jpg

Food commodity prices:

up 220 % since January 2002: 70 % since January 2006

1/ Food Commodities include grains, vegetable oils, meats, sugar, and other basic food commodities.

2

Source: International Monetary Fund: International Financial Statistics


Slide3 l.jpg

Food commodity prices:

up 220 % since January 2002: 70 % since January 2006

Percent increase in prices since

Jan 2002Jan 2006

Food Commodities 220 70

1/ Food Commodities include grains, vegetable oils, meats, sugar, and other basic food commodities.

3

Source: International Monetary Fund: International Financial Statistics


Slide4 l.jpg

Prices of many commodities rose:

Crude oil up 640 % since January 2002

Percent increase in prices since

Jan 2002Jan 2006

Food Commodities 220 70

All commodities 405 80

Crude oil 640 97

1/ Food Commodities include grains, vegetable oils, meats, sugar, and other basic food commodities.

4

Source: International Monetary Fund: International Financial Statistics


Slide5 l.jpg

Crop prices increase

(wheat, soybeans, corn & rice)

5

Source: International Monetary Fund: International Financial Statistics


Slide6 l.jpg

Real crop prices

(wheat, soybeans, corn & rice)

6

Source: International Monetary Fund: International Financial Statistics


Slide7 l.jpg

Crop price increases: real vs. nominal

Average of 4 crops (wheat, soybeans, corn & rice)

Real prices

Nominal prices

7

Source: International Monetary Fund: International Financial Statistics


Factors contributing to higher food commodity prices l.jpg
Factors contributing to higher food commodity prices

Strong growth in demand, based on:

Increasing population - Rapid economic growth - Rising per capita meat consumption

1996 1998 2000 2002 2004 2006 2007 2008

Slowing growth in ag production

Declining stocks of food commodities

Escalating crude oil price

Rapid expansion biofuels production

Dollar devaluation

Large foreign exchange reserves

Rising costs of ag production

Adverse weather

Demand factors in brown

Aggressive purchases by importers

Supply factors in green

Exporter policies

Importer policies

8


Slide9 l.jpg

World grain & oilseeds

Total production and use

9

Source: USDA PS&D Database


Slide10 l.jpg

Total world grain & oilseeds

Stocks and stocks-to-use ratio

10

Source: USDA PS&D Database


Long term trends contributing to higher food commodity prices l.jpg
Long term trends contributing to higher food commodity prices

  • Demand-side trends

  • Supply-side trends

11


Slide12 l.jpg

Population growth rates decline

(Percent by period)

Percent

12

Source: USDA Agricultural Baseline Projections to 2017.


Slide13 l.jpg

Strong economic growth

Average Real GDP growth rates

Percent

13

Source: USDA Agricultural Baseline Projections to 2017.


Slide14 l.jpg

Global meat1

Production and percapita consumption

Index: 1971 = 100

Exponential trend growth rates:

1975-90 90-07

Production 3.1 2.5

Population 1.7 1.4

Per capita 1.4 1.1

consumption

1 Total meat = beef + pork + chickens & turkeys.

14

Source: USDA Agricultural Projections to 2017.


Slide15 l.jpg

Global rice imports

Million metric tons

1/ European Union, former Soviet Union, and other Europe. 2/ Includes Mexico.

15

Source: USDA Agricultural Baseline Projections to 2017.


Slide16 l.jpg

Global soybean oil imports

Million metric tons

1/ European Union, former Soviet Union, and other Europe.

2/ Asia excluding India and China. 3/ Includes Mexico.

16

Source: USDA Agricultural Baseline Projections to 2017.


Slide17 l.jpg

Poultry imports 1/

Million metric tons

1/ Selected importers.

2/ EU-27 excludes intra-trade after 2002, EU-15 intra-trade before 2003, Slovenia before 1992.

17

Source: USDA Agricultural Baseline Projections to 2017.


Slide18 l.jpg

Total world grain & oilseeds1

Production, yield, area harvested, population & percap production

Index: 1970 = 100

Exponential trend growth rates:

1970-90 90-07

Production 2.2 1.3

Yields 2.0 1.1

Area 0.15 0.14

Population 1.7 1.4

Per capita use 0.56 0.11

1 Total oilseeds = soybeans + rapeseed + sunflowers

18

Source: USDA Agricultural Projections to 2017


Role of biofuels l.jpg
Role of biofuels

  • Focus on feedstocks

  • Major producers

  • Impact on land use

  • Impact on price relationships

19


Biofuels production largest producers l.jpg
Biofuels production:Largest producers

Million Gallons

Ethanol

Biodiesel

20

Source: USDA Agricultural Projections to 2017


Slide21 l.jpg

U.S. corn use

Billion bushels

1/ Food, seed, and industrial less ethanol.

21

Source: USDA Agricultural Baseline Projections to 2017.


Slide22 l.jpg

Global wheat and coarse grains use, 2002/03 – 2007/08

MMT

100%

Total

Food and other non-feed (except US corn ethanol)

44%

27%

Feed

US corn ethanol

30%

Crop year

Note: Category’s share of the change in total use from 2002/03 to 2007/08.

22

Source: USDA’s PS&D Database and estimates from ERS


Other contributing factors l.jpg
Other contributing factors

  • Higher energy prices

  • Weaker U.S. dollar

  • Increasing foreign exchange reserves held by importers

  • Adverse weather reduced crop production

  • Role of hedge funds, index funds, & sovereign wealth funds:

    • (affect demand and/or volatility?)

23


Slide24 l.jpg

Value of U.S. dollar declines after 2002 1/

Index values, 2000=100

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

based on 192 countries.

24

Source: USDA PS&D Database



Adverse weather reduced crop production in 2006 and 2007 l.jpg
Adverse weather reduced crop production in 2006 and 2007

  • Ukraine & Russia: drought for 2 years

  • Australia: severe drought for 2 years

  • Europe: dry spring; harvest floods

  • SE Europe: drought

  • NW Africa: drought

  • USA: late spring freeze

  • Canada: hot and dry

  • Turkey: dry

26


Food price inflation policy responses by some exporters and importers l.jpg
Food Price Inflation:Policy responses by someexporters and importers

  • Export restrictions

  • Lower import tariffs

  • Consumer subsidies

27


Defensive measures to control inflation exporters l.jpg
Defensive measures to control inflation -- Exporters

  • Eliminated export subsidies:

    • China (grains & products)

  • Export taxes:

    • China (grains & products)

    • Argentina (wheat, corn, soybeans, soymeal, soyoil)

    • Russia (wheat)

    • Malaysia (palm oil)

    • Kazakhstan (wheat)

  • Export quantitative restrictions:

    • Argentina, Ukraine (wheat)

    • India & Vietnam (rice)

  • Export bans:

    • Ukraine, Serbia, India (wheat)

    • Egypt (rice)

    • Kazakhstan (oilseeds & veg oils)

    • Cambodia (rice to neighboring countries)

    • Indonesia (rice)

28


Slide29 l.jpg

Defensive measures to control inflation -- Importers

  • Reduce Import tariffs:

    • India (wheat flour)

    • Indonesia (soybeans, wheat; will “green line” wheat flour)

    • Serbia (wheat)

    • Thailand (pork)

    • EU (grains)

    • Korea & Mongolia

  • Subsidized distribution of imported staples

    • Morocco (import wheat; subsidize bread sales)

  • Promoting a/o subsidizing production:

    • Indonesia (soybeans)

  • Other:

    • Iran imported corn from the USA

29


Other developments l.jpg
Other developments

  • Domestic price controls:

    • China (cooking oils, grain, meat, milk & eggs)

    • Thailand (food)

  • Protests

    • Malaysia (millers & bakers)

    • Indonesia (soybean prices; meat prices)

    • Pakistan (wheat)

    • USA (wheat)

  • Food riots:

    Guinea Mauritania Morocco

    Senegal Cameroon Mexico

    Uzbekistan Yemen Niger

    Burkina Faso Egypt Haiti

    Ethiopia Philippines Thailand

30


Slide31 l.jpg

Impact of high food commodity prices

on consumers food budgets

High-income Low-income countries food-deficit

countries

I. Base Scenario

Income 40,000 800

Food expenditure 4,000 400

Food as % of income 10.0% 50%

Disaggregate retail food spending

(staples vs. non-staples)

Staples as % of total food spending 20% 70%

Expenditures on staples 800 280

Expenditures on non-staples 3,200 120

II. Scenario: 50% Price increase in staples

Partial pass through on staples

Assumed % pass through 60% 60%

Increase in cost of staples 24084

New cost of staples 1040 364

New total food costs 4,240 484

Food as % of income10.6% 61%

31


U s title ii food aid allocations l.jpg
U.S. Title II Food Aid Allocations

$ Billion

Million metric tons

*2008 is an forecast

32


Slide33 l.jpg

Food commodity price spikes

since 1970

33

Source: International Monetary Fund: International Financial Statistics


Categories of factors contributing to higher food commodity prices l.jpg
Categories of factors contributing to higher food commodity prices

Temporary factors:

Structural changes:

Questionable future impact:

Continuation of long-term trends:

  • Rapid economic

    growth in many

    developing

    countries

  • Population growth

    in developing

    countries

  • Increasing per

    capita meat

    consumption

  • Adverse

    weather

  • Trade policies

    by exporters

    and importers

  • Aggressive

    buying by

    importers

  • Further dollar

    depreciation

  • Slower growth

    in ag productivity

  • Role of large

    foreign exchange

    reserves held by

    importers

  • High oil

    prices

  • Biofuels

    production

  • High ag

    production

    costs

  • Supply factors in green

  • Demand factors in brown

34


Slide35 l.jpg

U.S. Commodity Prices: History & Projections prices

Soybeans, Wheat, Corn, & Rice

Projections from Nov 2007 USDA Baseline

$ per bushel; ($ per cwt for rice)

Rice

Soybeans

Wheat

Corn

Source: USDA Agricultural Baseline Projections to 2017, February 2008.

35


Slide36 l.jpg

Global Agricultural Supply and Demand: pricesFactors Contributing to the Recent Increase in Food Commodity Prices

Report available at:

http://www.ers.usda.gov/Publications/WRS0801/

Ronald Trostle

Economic Research Service

U.S. Department of Agriculture

rtrostle@ers.usda.gov

202-694-5280

36


ad