Economists Cite Six Factors for Oil, Food Price Hikes
Source: NewsBlaze (Original Article)
By Charles W. Corey
World prices for oil and food commodities are closely linked, and six key factors are creating a “perfect storm” of conditions that are boosting prices worldwide, a group of U.S. Department of Agriculture (USDA) economists said June 23.
Members of the group who spoke to America.gov, include Michael J. Dwyer, director and chief economist for the Foreign Agricultural Service; Daniel B. Whitley, deputy director of that office; and Hui Jiang, a USDA agricultural economist.
Normally, Dwyer said, the international system is dynamic enough to handle one or two simultaneous shocks, but the number of factors in play today “pretty much overwhelms the system’s ability to deal with it, and prices are spiking sharply higher.”
He and his colleagues outlined six factors.
First, higher energy prices have led to higher input costs for pesticides, fertilizers and herbicides (many of which are petroleum-based), higher processing costs and higher costs for transportation - which directly affects the cost of food being shipped overseas.
“Right now, to ship a ton of corn out of New Orleans to Asia [costs] about $130,” a dramatic increase from not long ago. “When farmers have to pay more for their fertilizers and other inputs,” Dwyer said, “it means these higher food prices are not all pure profit to a producer because their costs are up as well.”
Dwyer said it is incorrect to single out the current U.S. biofuels policy, which promotes the conversion of some corn into biofuels, for driving up prices.
“A lot of the world press is covering this issue right now, and it is probably the number one issue in the newspapers around the world. Unfortunately, a lot of the newspapers have unfairly scapegoated the U.S biofuels policy as the driver behind why corn prices and commodity prices in general have spiked sharply higher in the last 18 months.
“We don’t dispute that ethanol has had a Citibank Gold role,” he said. “What we are …continue reading