The President spoke this afternoon about high food prices and food aid. If you’d like more detail, here’s our “fact sheet.” And if you really want to dive down deep, here is a transcript of a press briefing done by three senior administration officials after the announcement: OMB Deputy Director Steve McMillin, CEA Chairman Ed Lazear, and Deputy National Security Advisor for International Economic Affairs Dan Price.

I’d like to zoom out a bit and discuss how food prices interact with policy.

Let’s consider the following questions:

• How much are food prices increasing?
• Why are food prices increasing?
• What kind of effect is this having in the U.S., and what are we doing about it?
• What about overseas effects?
• What did the President announce today?
• Is the ethanol mandate contributing to the increase in food prices?

How much are food prices increasing?

Much of the increase in food prices worldwide is due to increases in grain prices. Since March of last year:

• wheat prices are up 146%
• soybean prices are up 71%
• corn prices are up 41%
• and rice prices are up 29%.

Why are food prices increasing?

• Increased demand in “emerging markets” (like China) accounts for about 18% of the rise in food prices. As people in poor countries get richer, they consume more meat. Since it takes a lot of grain to produce a little meat, as the proportion of meat in diets increases, the demand for grains increases.
• Rising energy costs have increased the cost of growing food, accounting for up to another 18% of the increase.
• Bad weather has harmed wheat harvests, especially in Australia, China, and Eastern Europe.
• Dollar depreciation accounts for a portion of the increase in U.S. food prices.
• Increased biofuel production has increased the demand for corn, but accounts for only 3% of the overall increase in global food prices.

What kind of effect is this having in the U.S., and what are we doing about it?

Food price inflation in the U.S. is up 4.5% over the year that ended in March, only slightly faster than the overall inflation rate of 4.0% (CPI). Certain staples […]