BPEA | 1973 No. 2

The 1972-73 Food Price Spiral

1973, No. 2

THE SHARP RISE in U.S. and world prices of agricultural commodities in
1972 and 1973 traces to five principal clauses: (1) a decline in world production
of grains, and a persistent lag in growth in protein meal production
relative to demand; (2) rapid growth in the demand for meats in all developed
countries, based mainly on rising personal incomes; (3) U.S. farm
policies and programs that discouraged expansion of soybean production,
and continued to idle large acreages of cropland that should have been
turned to livestock production at least three years ago; (4) administrative
lags and errors regarding export subsidies, evaluation of crop reports from
abroad, estimation of prospective export volumes, and the need to expand
agricultural production sharply and to limit exports in 1973; and (5) devaluation
of the dollar, which added to the demand for farm products and
raised prices in countries whose currencies were devalued.