Economyths
Posted: May 18, 2009
The New York Times had an editorial over the weekend under what they call their “Running Commentary” featuring thoughts from five different economists on why wholesale prices for food were up 1.5 percent in April, the biggest monthly increase since January 2008. The title is “Food Prices: Myths vs. Reality.”
Here’s a summary of the five responses from the economists:
1. Bill Lapp, former chief economist with ConAgra Foods, blames it on reduced availability of corn, increased demand for ethanol, and lower livestock numbers.
2. Arizona State University business professor Tim James pointed out that the increase is wholesale prices, not retail, which is a more volatile index. The consumer price index actually shows a 0.2% decline in food prices.
3. UC Davis extension marketing economist Roberta Cook says there are many factors that influence food prices and one of them is tomatoes …. no, wait – it’s consumers’ willingness to pay more for better tomatoes.
4. Michael J. Roberts, assistant professor of agricultural and resource economics at North Carolina State University, noted that food prices declined in four of the five previous months, commodity prices dropped 70 percent between July 2008 and March 2009 and prices are now some 55 percent off last summer’s highs.
5. Finally, Washington State University ag economist Karina Gallardo basically said there are too many factors affecting too many different types of food to say with any certainty why prices went up.
So what did we learn from this, class? If this were multiple choice test, which answer would you pick if you were asked why wholesale food prices were up in April?
A. Ethanol
B. Don’t worry about it
C. Eat better tomatoes
D. Prices are actually lower
E. None of the above