Why the agricultural commodity price is higher than last few years?

Question

Why the agricultural commodity price is higher than last few years?

Answer 1

David's answer sounds good, but he is obviously not a farmer. Farmers need to charge more for what they grow because of inflation? Oh, just wish that we could. The price farmers get is whatever the the market is paying. If you take a load of wheat to the elevator and they tell you the price is $2.90 a bushel and you tell them, no you need $3.50 because the price of your fuel has gone so much, they would laugh you out of the place.

The higher prices you are seeing right now is because they are making ethanol out of mainly corn but some other grains and sugarcane as well. It is not necessarily a bad thing, farmers have needed higher prices for several years. We have been spoiled because of low food prices. The price you are paying in the grocery store is is not going to the farmer, only a very small portion of it. So don't blame the farmer or even ethanol for the higher prices of food, it has helped the farmers some, but the high food prices are mainly due to added costs because fuel and other costs of processing to get the food to the grocer.

Answer 2

from India to China needing more food and fuel to large investment funds in the market to ethanol to drought and other weather factors to land prices due to urbanization and 1031 money.   global market......

Answer 3

because the demand is higher.  partly due to the pressure of ethanol production.  increased costs of grains affect meat, milk, eggs, as well as bread and cereal

Answer 4

demand+shortage+population increase= higher prices

Answer 5

First, not all crops have seen a general increase in prices.  

Second, define the dollar.  While a dollar is the equivalent of 100 cents, one cent in 2008 has a different purchase price of a cent in 1908.  Given this, agricultural commodity prices today may not be any higher than those of other decades.  A 1997 Smithsonian article place the 1907 price of corn to be $22+ per bushel in 1997 dollars, consequently, the $6/bushel price of corn seen on some futures markets is not all that high.

Third, there is a difference between the farmer price (aka gate price) and that given for the markets (Chicago, etc).  This difference would include the cost of shipping which the increased transportation costs would affect.

Fourth: Demand.  The greater the demand for a given product the higher the price received.  There is a perceived increase in demand which has gotten several speculators interested in the futures market for many commodities.  Whether this demand is actual, a figment of speculators imagination, or a future potential has yet to be determined

Answer 6

The amount of land on which crops can be grown is finite. We have had some land banking to take land out of production, but now we are close to zero land banking, and land that has been used for food production is being diverted for ethanol or other bio fuels.

If we had a substantial improvement in yields, even those land diversions would not increase prices of crops. But crop yields have not been rising sharply, so we are coming closer to a balance to real demand.

When we get close to real demand, commodities that store well become a target for commodity speculation... people decide to store grains in hope that next year may see major shortage that they can sell into.

Other parts of the world also have an interest in buying food, Not just because of current need, but for food security as well.

Shortly even Americans will start to think in terms of buying up food to preserve food security.

Answer 7

this is a very complex economics question. with a few simple answers.

a- inflation. prices of everything are going up. this means living costs go up. which means farmers need to charge more for whatever goods they sell.

b- they can... see (a) except they raise prices higher than said increase in cost of living.

c- there is heavy fear of a mid-west drought because of weather patterns in the pacific...

d- some people want to blame ethanol production. its not major, but it is a factor

cant think of much more