Food prices could increase by more than 4 percent in 2011 as the farm sector recovers from a sharp downturn in the recession, University of Missouri (MU) economists reported to Congress.
An annual MU Food and Agricultural Policy Research Institute (FAPRI) baseline shows net farm income may reach a record $99 billion in 2011.
Food prices will rise not only from higher prices paid at the farm level for food grains and livestock but also from recent increases in energy costs. Oil prices affect not only costs in agricultural production but also for transportation and processing up the supply chain, Pat Westhoff said, director of MU FAPRI.
Higher feed and other input costs, along with lower prices during the recession, lowered output of meat and milk. At the same time, domestic and international demand remained strong.
"Reduced production, growing exports and population growth combine to limit supplies of meat and milk for domestic consumers," said Scott Brown, FAPRI livestock economist. "Tight supplies and improving demand initiated price increases in 2010."
With strong prices, more land will be drawn into crop production. FAPRI reports the area for the 13 major crops will increase by almost 8 million acres to top 258 million acres in 2011.
The baseline presented to Congress will be used to study the economic impact of proposed policy changes, including the 2012 Farm Bill. A full-text copy of the MU FAPRI baseline report can be found at www.fapri.missouri.edu.
Source: University of Missouri