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USDA: IMPACT OF FARM-LEVEL PRICE VOLATILITY LESSENS AS FOOD GETS CLOSER TO THE TABLE
Source: USDA news release



Disruptions to food production and changes in demand due to the COVID-19 pandemic may impact prices for farm products.

However, farm price swings generally have less impact on food prices as food gets closer to the dinner table. In 2009, the last year of the Great Recession, the production-weighted farm price of the field crops corn, wheat, and soybeans decreased by 20 percent.

That same year, the Producer Price Index for intermediate foods and feeds, such as wheat flour and soybean oil, fell 9 percent. Retail food prices—including foods purchased in stores and eating places—rose 2 percent.

Converting farm commodities into consumer foods, such as corn flakes and restaurant meals, requires additional production inputs such as labor, energy, packaging, transportation, and marketing.

Thus, farm commodity prices are a small piece of retail food prices, particularly for highly processed products and restaurant offerings. Another reason retail food prices tend to be less volatile than farm and wholesale prices is the structure of the grocery retail industry, with large chains often using marketing contracts to smooth price spikes in the products they purchase and keep retail food prices more stable.

While the data in this chart predate the COVID-19 pandemic and do not reflect its impacts on food supply chains and food demand, examining past food-price dynamics can provide insight into current events.

This chart appears in the Economic Research Service’s May 2020 Amber Waves article, “Retail Food Prices Less Volatile Than Farm and Wholesale Prices.”


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