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Department of Economics
Food and Fuel
Wallace Centers of Iowa Dialogue DinnerDes Moines, Iowa
July 16, 2009
Chad HartAssistant Professor/Grain Markets Specialist
chart@iastate.edu515-294-9911
Department of Economics
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Ethanol ProductionBased on the pace over the 1st 2 months of 2009
Sources: Renewable Fuels Association, Energy Information Administration
Department of Economics
Commodity Price Ratios (Sept. 2006 =1)
0.5
1.0
1.5
2.0
2.5
3.0
3.59/1
/2006
11/1
/2006
1/1
/2007
3/1
/2007
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/2007
7/1
/2007
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Corn Soybeans Wheat Rice
Department of Economics
Factors Leading to Higher Commodity Prices
Source: USDA-ERS, Trostle, July 2008
Department of Economics
Commodity Price Indexes
Source: International Financial Statistics
Department of Economics
Events in 2007Droughts:
Northern Europe, Ukraine, Russia, Northwest Africa, Turkey, Australia, and Argentina
Increased export taxes:China, Argentina, Russia, Kazakhstan,
Malaysia, and Indonesia
Export restrictions:Argentina, Ukraine, India, Vietnam, Serbia,
Egypt, Cambodia, Indonesia, and Kazakhstan
Department of Economics
The Food Dollar
Source: USDA-ERS
Department of Economics
U.S. Food Marketing SystemFive distinct sectors
•Agricultural production•2 million farms
•Food processing and manufacturing•25,000 food and beverage companies
•Wholesale distribution•33,000 food wholesalers
•Retail distribution•113,000 food retailers•378,000 foodservice companies
•Consumption•111 million households
Department of Economics
Farm to Retail Food Price Spread
Food Farm Value Share of
Retail Food Price
Food Farm Value Share of
Retail Food Price
Eggs 53 Canned Corn 22
Beef 49 Sugar 27
Chicken 48 Wheat Flour 19
Milk 34 Bread 5
Pork 31 Corn Flakes 4
Orange Juice 33 Corn Syrup 3
Source: USDA-ERS, 2001
Department of Economics
Declining Farm Value in Food
Source: USDA-ERS
15%
20%
25%
30%
35%
40%
45%
1950
1954
1958
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
In the 1950s, 25% of food was consumed away from home.Today, nearly 50% of food is consumed away from home.
Department of Economics
Changes in Food Price Indexes
Sources: Bureau of Labor Statistics, USDA-ERS
Consumer price indexes Relative importance
1
Final 2005
Final 2006
Final 2007
Final2008
Forecast 20092
(Percent)All food 100.0 2.4 2.4 4.0 5.5 3.0 - 4.0Food away from home 44.3 3.1 3.1 3.6 4.4 3.5 - 4.5Food at home 55.7 1.9 1.7 4.2 6.4 2.5 - 3.5Meats, poultry, and fish 12.2 2.4 0.8 3.8 4.2 2.0 - 3.0Eggs 0.7 -13.7 4.9 29.2 14.0 -7.5 - -6.5Dairy products 6.2 1.2 -0.6 7.4 8.0 -5.5 - -4.5Fats and oils 1.6 -0.1 0.2 2.9 13.8 3.0 - 4.0Fruits and vegetables 8.2 3.7 4.8 3.8 6.2 3.0 - 4.0Sugar and sweets 2.1 1.2 3.8 3.1 5.5 3.0 - 4.0Cereals and bakery 7.9 1.5 1.8 4.4 10.2 2.5 - 3.5Nonalcoholic beverages 6.7 2.9 2.0 4.1 4.3 3.0 - 4.0Other foods 10.1 1.6 1.4 1.8 5.2 3.0 - 4.01BLS estimated expenditure shares, December 20082Forecasts updated June 20, 2009
Department of Economics
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Conventional Biofuels Cellulosic Biofuels
Biodiesel Additional Advanced Biofuels
Renewable Fuels Standard (RFS)
60% GHG Emission Reduction
50% GHG Emission Reduction
20% GHG Emission ReductionIf construction started after Dec. 2007
Department of Economics
BiomassWind
Solar
Alternative Sources
Department of Economics
Thank you for your time!
Any questions?
http://www.econ.iastate.edu/faculty/hart/
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