Food costs rising fastest in 17 years

Posted by Jon Sanders at 5:31 PM

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USDA economist Ephraim Leibtag explained the jumps in a recent presentation to the Food Marketing Institute, starting with the factors everyone knows about: sharply higher commodity costs for wheat, corn, soybeans and milk, plus higher energy and transportation costs.

The other reasons are more complex. Rapid economic growth in China and India has increased demand for meat there, and exports of U.S. products, such as corn, have set records as the weak dollar has made them cheaper. That's lowered the supply of corn available for sale in the U.S., raising prices here. Ethanol production has also diverted corn from dinner tables and into fuel tanks.

Soybean prices have gone up as farmers switched more of their acreage to corn. Drought in Australia has even affected the price of bread, as it led to tighter global wheat supplies.

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Some factors, of course, are beyond our control. The drought in Australia, economic growth in China and India, for example. But let's not overlook the elephant in the room: ethanol. The massive jump in corn prices (and substitute goods and affected foods) occurred shortly after passage of the Energy Policy Act of 2005.

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