Infographic: The Facts Behind Food Prices
By CME Group - Wed Dec 12 11:45:00 CST 2012 CT
Related Keywords: Agriculture, Market Fundamentals

One of the worst U.S. droughts in 50 years is striking the Midwest, withering crops and sending corn and soybean prices to all-time record highs, and the extreme weather could last through harvest. According to the USDA, consumers can expect to pay up to 4% more for groceries next year as a result. Clearly weather is impactful, however it’s only one of the factors that affect the price of our food.

Effective markets are part of the solution to managing grain price volatility as a result of these factors behind food prices. Farmers use our futures markets to manage their price risk, and speculators play an important role in these markets. They take on that price risk in exchange for the opportunity to make a profit. In doing so, speculators are providing much-needed liquidity to hedgers and helping to discourage the swings in price volatility that might otherwise be much more severe without them.

 

food infographic

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