Analyzing Factors Affecting US Food Price Inflation

Since the summer of 2007, U.S. food price inflation has increased dramatically. Given public anxiety over fast-rising food prices, this study attempts to analyze the effects of market factors-prices of energy and agricultural commodities and exchange rate-on U.S. food prices using a cointegration analysis. Results show that the agricultural commodity price and exchange rate play the key roles in determining the short- and long-run movement of U.S. food prices. It is also found that in recent years, energy price has been a significant factor affecting U.S. food prices in the long run, but has little effect in the short run. This implies the strong linkage between energy and agricultural markets in the long run over the recent years. © 2010 Canadian Agricultural Economics Society.