As future policy options are debated - a new study released by Farm Foundation shows it’s important to understand the multiple complex factors influencing today’s food prices. The study - written by Purdue University Economists Wallace Tyner, Christopher Hurt and Philip Abbott - identifies three broad sets of forces driving food price increases: global changes in production and consumption of key commodities - the depreciation of the U.S. dollar and growth in the production of biofuels.

The authors do not try to calculate the percentage of price changes attributable to the different causes. In fact - Tyner says they think it would be impossible to do so. But they do look at the relationship of the different forces. For instance - the link between the decline of the dollar and commodity prices - as well as oil prices. Then there’s the issue of supply and demand. The study highlights how demand for agricultural commodities has increased as the growth in productivity has slowed - the impact of which - is clear. The impact of increased speculative activity - on the other hand - is not clear. The authors state that - based on existing research - it’s impossible to say whether price levels have been influenced by speculative activity.

For policy makers - the authors say the challenge is to find policy options that deal with the short-term effects of rising food prices without creating a new set of long-term problems.

A copy of the report is available at www dot farmfoundation dot org (www.farmfoundation.org).