Analyzing Factors Affecting U.S. Food Price Inflation.

Abstract

Since the summer of 2007, U.S. food price has increased dramatically. Given public anxiety over fast-rising food prices in recent years, this paper attempts to analyze the effects of market factors ─ prices of energy and agricultural commodities and exchange rate ─ on U.S. food prices using a co-integration analysis. Results show that the agricultural commodity price and exchange rate play key roles in determining the short- and long-run movement of U.S. food prices. It is also found that in recent years, the energy price has been a significant factor affecting U.S. food prices in the long-run, but has little effect in the short-run. This implies the strong long-run linkage between energy and agricultural markets has emerged through production of commodity-based ethanol in the recent years.Agricultural commodity price, Energy price, Exchange rate, Food price inflation, Time-series analysis, Agribusiness,