Professional Documents
Culture Documents
Jason Henderson Omaha Branch Executive Federal Reserve Bank of Kansas City
The opinions expressed are those of the author and do not necessarily reflect the views of the Federal Reserve Bank of Kansas City or the Federal Reserve System.
0.0
1990
Source: USDA
0
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Percent
25.0
0.0 1970 1975 1980
-2.5
-5.0 2005 2010
1985
1990
1995
2000
Source: Henderson and Briggeman (2011), What are the Risks in Todays Farmland Market? Main Street Economist, Issue 1.
In 1900, only a few counties had land values with more than $1000 per acre.
Real Farmland Values in 1900
$3,000 or more
$2,000 to $3,000 $1,000 to $2,000 $500 to $1,000 $500 or less
Source: USDA
$3,000 or more $2,000 to $3,000 $1,000 to $2,000 $500 to $1,000 $500 or less
Source: USDA
By the end of the Great Depression, land values were back to 1900 values.
Real Farmland Values in 1940
$3,000 or more $2,000 to $3,000 $1,000 to $2,000 $500 to $1,000 $500 or less
Source: USDA
$3,000 or more $2,000 to $3,000 $1,000 to $2,000 $500 to $1,000 $500 or less
Source: USDA
$3,000 or more $2,000 to $3,000 $1,000 to $2,000 $500 to $1,000 $500 or less
Source: USDA
$3,000 or more $2,000 to $3,000 $1,000 to $2,000 $500 to $1,000 $500 or less
Source: USDA
Today, robust energy and agricultural prices spur cropland value gains.
Non-irrigated Cropland Values
(Percent change 2010:Q2 to 2011:Q2)
The Costs
Food prices escalate, especially for the poor. Depending on your perspective, food vs. fuel.
260
240 220
200
180 160
200
180 160
140
120 J F M A
140
120 J A S O N D
Yet, U.S. food prices continue to rise, especially for food consumed at home.
U.S. Food Price Inflation
10 8 6
10 8 6
4
2 0
4
2 0
-2
-4 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
-2
-4
Why is there a difference between world and U.S. food price inflation?
Commodities account for a smaller share of processed foods.
Farm share of U.S. food dollar Beef products Milk products Fruits and vegetables Bread Corn flakes 45 cents 30 cents The U.S. Food Marketing Bill
25 to 28 cents
4 cents 4 cents
Corn syrup
Source: USDA
3 cents
Why is there a difference between world and U.S. food price inflation?
Wealthy nations eat more processed foods.
Per capita fast-food expenditures (2005) U.S. Canada United Kingdom Japan Brazil China India
Source: USDA and Euromonitor
Percent
60 50 40 30 20 10 0
High-income Upper-middle income Lower-middle income
40
26
9.8
0
Source: USDA
10
2011 3.5 to 4.5 3.0 to 4.0 4.0 to 5.0 6.5 to 7.5 5.0 to 6.0 3.5 to 4.5 2.5 to 3.5 4.0 to 5.0
2012 2.5 to 3.5 2.0 to 3.0 3.0 to 4.0 3.5 to 4.5 3.5 to 4.5 3.0 to 4.0 2.0 to 3.0 4.5 to 5.5
Yet, forecasts suggest slower inflation in 2012. Inflation expectations remain stable.
Quantity
350
300 250 200 150 100 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10
350
300 250 200 150 100
Conclusions
Market fundamentals drive market prices, monetary policy is an amplifier. Agricultures Golden Eras emerged in low interest rate environments. Agriculture enjoys booming farm incomes and land values, but Urban consumers bear the burden of higher food prices. Velocity will shape inflation in the future.