July 25, 2008
Food Inflation...No Small Potatoes
Analysis of:
Consumer Price Index Summary | www.bls.gov
This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Implications: For the first time recorded, corn acreage in Idaho is surpassing potatoes. What’s my point? Rising grain prices are leading to broader food inflation than initially meets the eye.
Analysis: This may be the first time I spend time writing about a produce item but my point is broader as hopefully you will see. This week the discussion involves potatoes. The USDA recently published their estimate for 2008 Idaho fall potato acreage which is 300,000. Sounds like a lot of acreage going to one product in one state but as we look further plantings are 14% or 50,000 acres less than a year ago. As a matter of fact, Idaho potato acreage this year is the lowest since 1980. About 90% of the US potato acreage is designated for the Fall season and Idaho last year accounted for 35% of the total acreage in the US. In short, Idaho potato acreage is “no small potatoes” in reference to the entire US potato supply. So where did all of the potato acreage go in Idaho? Good question. Spring wheat acreage in Idaho this year is forecasted to be 15% higher than a year ago and the largest since 2000. Grain corn acreage in the state this year is forecasted to be 7% more than a year ago and the largest on record. These two very profitable grain crops account for a 90,000 acre increase this year. For the first time recorded, corn acreage in Idaho is surpassing potatoes. What’s my point? Rising grain prices are leading to broader food inflation than initially meets the eye. The rise in wheat and bread prices are well documented. Expectations are for higher protein prices in the coming years due in part to inflated feed costs. And because grains have become so profitable to plant, other crops including potatoes may continue to experience below average acreage over the next few years leading to market inflation in those products.
Analysis: This may be the first time I spend time writing about a produce item but my point is broader as hopefully you will see. This week the discussion involves potatoes. The USDA recently published their estimate for 2008 Idaho fall potato acreage which is 300,000. Sounds like a lot of acreage going to one product in one state but as we look further plantings are 14% or 50,000 acres less than a year ago. As a matter of fact, Idaho potato acreage this year is the lowest since 1980. About 90% of the US potato acreage is designated for the Fall season and Idaho last year accounted for 35% of the total acreage in the US. In short, Idaho potato acreage is “no small potatoes” in reference to the entire US potato supply. So where did all of the potato acreage go in Idaho? Good question. Spring wheat acreage in Idaho this year is forecasted to be 15% higher than a year ago and the largest since 2000. Grain corn acreage in the state this year is forecasted to be 7% more than a year ago and the largest on record. These two very profitable grain crops account for a 90,000 acre increase this year. For the first time recorded, corn acreage in Idaho is surpassing potatoes. What’s my point? Rising grain prices are leading to broader food inflation than initially meets the eye. The rise in wheat and bread prices are well documented. Expectations are for higher protein prices in the coming years due in part to inflated feed costs. And because grains have become so profitable to plant, other crops including potatoes may continue to experience below average acreage over the next few years leading to market inflation in those products.
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