Monday, June 25, 2007

And You Thought Gas Prices Were High.. "Agflation"

The chart above shows prices for retail gasoline prices and wholesale milk prices over the last year, using data from the EIA (monthly gas prices) and Global Financial Data (monthly average corn prices paid to farmers), both converted to a price index that equals 100 in June 2006. As the data show, gas prices are about the same as a year ago, while milk prices have increased by 50% in the last 12 months. And more milk price increases are coming...

today's WSJ: "On Friday, the Agriculture Department, which regulates the minimum milk prices received by farmers, set the price that processors will have to pay for drinkable milk in July at $20.91 per hundred pounds of milk, up 17% from the June price and up 84% from a year earlier.

In the U.S., some dairy farmers are raising milk prices to offset the higher prices they pay for cattle feed as corn prices rise. Corn is a key feed ingredient.

In May, the average price of a gallon of whole milk in the U.S. was $3.26, up 6.2% from $3.07 a year earlier, according to the Labor Department.

Cheese prices are also starting to rise and Pizza Hut recently raised the price of a regular cheese pizza."


At 6/25/2007 9:23 PM, Anonymous Anonymous said...

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At 3/10/2009 9:47 PM, Anonymous Anonymous said...

Rather selective reporting of the two prices series, isn't it? Perhaps your graph would be more informative if you didn't cherry-pick such a narrow time series.

Moreover, you might want to research what proportion of fluid milk sold in U.S. is farmer-priced -- it is likely far less than one percent. So, your claim that dairy farmers are raising prices is in error as to the pricing power of almost all dairy farmers.

Not trying to nitpick, but I have a Ph.D. in Economics and I grew up on a dairy farm, so I have some knowledge of this.

While you are at it, you might want to produce a 25-year time series of the ratio of farmgate-to-retail prices of milk, and milk's share of the average urban household's expenditures, just to add some well-needed perspective.


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