March 10, 2008

What is Driving Food Price Inflation?

The Federal Reserve Bank of Kansas City released a report today on the factors driving food price inflation. The report noted that commodity prices driven by expanding biofuels usage have had an effect on certain items but that the marketing cost (the difference between the farm value and consumer spending for food at grocery stores and restaurants) has lead the biggest part of the increase. It notes that marketing costs have risen from 59% of the retail food dollar in 1950 to 80% today. Recent increases in marketing costs have been lead higher by increasing labor and energy costs.

The report also notes that farm commodities accounted for 19% of the retail food dollar in 2005, down from 41% in the 1970s.

Full Report (PDF)

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