Department of Economics Food and Fuel Wallace Centers of Iowa Dialogue Dinner Des Moines, Iowa July 16, 2009 Chad Hart Assistant Professor/Grain Markets Specialist

Department of Economics Ethanol Production Based on the pace over the 1 st 2 months of 2009 Sources: Renewable Fuels Association, Energy Information Administration

Department of Economics Commodity Price Ratios (Sept =1)

Department of Economics Factors Leading to Higher Commodity Prices Source: USDA-ERS, Trostle, July 2008

Department of Economics Commodity Price Indexes Source: International Financial Statistics

Department of Economics Events in 2007 Droughts: Northern Europe, Ukraine, Russia, Northwest Africa, Turkey, Australia, and Argentina Increased export taxes: China, Argentina, Russia, Kazakhstan, Malaysia, and Indonesia Export restrictions: Argentina, Ukraine, India, Vietnam, Serbia, Egypt, Cambodia, Indonesia, and Kazakhstan

Department of Economics The Food Dollar Source: USDA-ERS

Department of Economics U.S. Food Marketing System Five distinct sectors Agricultural production 2 million farms Food processing and manufacturing 25,000 food and beverage companies Wholesale distribution 33,000 food wholesalers Retail distribution 113,000 food retailers 378,000 foodservice companies Consumption 111 million households

Department of Economics Farm to Retail Food Price Spread FoodFarm Value Share of Retail Food Price FoodFarm Value Share of Retail Food Price Eggs53Canned Corn22 Beef49Sugar27 Chicken48Wheat Flour19 Milk34Bread5 Pork31Corn Flakes4 Orange Juice33Corn Syrup3 Source: USDA-ERS, 2001

Department of Economics Declining Farm Value in Food Source: USDA-ERS In the 1950s, 25% of food was consumed away from home. Today, nearly 50% of food is consumed away from home.

Department of Economics Changes in Food Price Indexes Sources: Bureau of Labor Statistics, USDA-ERS Consumer price indexesRelative importance 1 Final 2005 Final 2006 Final 2007 Final 2008 Forecast (Percent) All food Food away from home Food at home Meats, poultry, and fish Eggs Dairy products Fats and oils Fruits and vegetables Sugar and sweets Cereals and bakery Nonalcoholic beverages Other foods BLS estimated expenditure shares, December Forecasts updated June 20, 2009

Department of Economics Renewable Fuels Standard (RFS) 60% GHG Emission Reduction 50% GHG Emission Reduction 20% GHG Emission Reduction If construction started after Dec. 2007

Department of Economics Biomass Wind Solar Alternative Sources

Department of Economics Thank you for your time! Any questions?