October 21, 1998 (The Editor’s Desk is updated each business day.)
Impact of grain price shocks may be
lessening
The impacts on consumers' food prices of spikes in food
prices at the producers' level have been somewhat weaker in the most recent episodes.
Grain price shocks, defined as a 20-percent or greater increase in the annual
average producer prices for at least two of the three key feed grains (corn, soybeans,
wheat), occurred in 1973-4, 1988, and 1996. In general, these shocks have been
associated with a 2-year period in which food inflation has surpassed core inflation at
the consumer level.
[Chart data—TXT]
In 1974, the food and beverages component of the Consumer Price Index (CPI-U) rose at
1.65 times the rate of core inflation (CPI-U less the food and energy components). In 1989, food prices for consumers rose at 1.27 times the rise in the "core"
CPI. In 1996, the ratio of the increase in food prices to that of the CPI less food
and energy was 1.19.
One way the dynamics of price transmission has changed is that the price consumers pay
for food is less dependent on the price the producers—farmers—receive. The
farm value portion of food costs has trended downward for years.
Another change in the dynamics is that the increasing consolidation of agricultural
businesses has created opportunities to realize economies of scale. The resulting
slower rise in unit costs combined with the continued presence of competition has further
reduced the impact of farm price shocks on food inflation.
These data are products of the BLS Producer Price
Indexand Consumer Price Index programs. For
additional information, see "The
1996 grain price shock: how did it affect inflation?," Monthly Labor Review,
August 1998.
Of interest
Spotlight on Statistics: National Hispanic Heritage Month
In this Spotlight, we take a look at the Hispanic labor force—including labor force participation, employment and unemployment, educational attainment, geographic location, country of birth, earnings, consumer expenditures, time use, workplace injuries, and employment projections.
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