Name ______________________________________ Hour _________ Date __________________________
UNPREDICTABLE WEATHER AND EXPANDING MARKETS PROMISE TO KEEP FOOD PRICES HIGH
As mechanized as our food industry has become, the retail price of food is still at the mercy of two
unpredictable forces: mother nature and international market speculation. Two crops that have shaped the
American diet since the latter half of the 20th Century were recently shocked by one or both of these forces.
Here are some reasons why your diet might become more expensive in the not-too-distant future:
Prolonged summer heat has devastated the summer crop of Runner peanuts, the staple variety used for most
peanut butter production. Close to 90% of U.S. households consume peanut butter on a regular basis and an
estimated 1.5 million pounds of peanut products are purchased annually. In 2010, raw peanuts fetched about
$450 a ton. Now, a ton of peanuts costs $1,150 wholesale, according to U.S. Department of Agriculture figures.
Industry insiders say the price spikes will trickle down to consumers by the end of this month. According to
a Wall Street Journal report:
Wholesale prices for big-selling Jif are going up 30% starting in November, while Peter Pan will raise
prices as much as 24% in a couple weeks. Unilever would not comment on its pricing plans, but a
spokesman for Wegmans Food Markets said wholesale prices for all brands it carries, including Skippy,
are 30 percent to 35 percent higher than a year ago.
Kraft Foods Inc., which launched Planters peanut butter in June, is raising prices 40 percent on Oct. 31,
a spokeswoman said.
But peanuts aren't the only crop that was adversely affected by heat and drought. The Los Angeles Times is
reporting that unpredictable weather has also complicated the growing season for pumpkins in many parts of
the country. Halloween demand will likely put pressure on processors and retailers to raise prices on pumpkins
and pumpkin products.
The recent announcement by the USDA that China will become a steady importer of U.S. corn falls into the
man-made category of food price inflation. Last week, China made one of its largest-ever corn purchases from
the U.S., buying some 900,000 metric tons of the grain. Thanks to generous government subsidies, corn is
America's largest agricultural commodity, and it is used in a wide variety of products from processed foods and
drinks to industrial applications such as a mandated additive in gasoline.
The projection of higher demand for corn in emerging markets by overseas traders has placed long-term
upward pressure on prices for many consumer goods. According to an AP report, corn prices on the Chicago
Board of Trade “have increased about 70 percent over the past two years though have eased from near record
highs in June.”
Much like the U.S., livestock accounts for about 70 percent of China's corn consumption. The majority of
what's left is used to produce alcohol, food sweetener, corn starch and other products. A very small portion is
consumed as whole grain by humans.
Source: http://caivn.org/article/2011/10/19/unpredictable-weather-and-expanding-markets-promise-keep-foodprices-high
Name ______________________________________ Hour _________ Date __________________________
Food Inflation
1) What is causing the price of peanut related products to rise? Show how the supply and demand would
be affected in graph 1 below.
2) Why are pumpkin products likely to be more expensive this month (two reasons)? Show how the supply
and demand would be affected in graph 2 below.
3) Explain why might the price of corn be increasing? Show how the supply and demand would be
affected in graph 3 below.
(1)
(2)
S1
D1
(3)
S1
D1
S1
D1