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Working Paper
The Passthrough of Agricultural Commodity Prices to Food Prices
Food inflation has been excluded from core measures of inflation under the reasoning that it is a phenomenon of the supply side of the economy, driven by stochastic supply shocks to agricultural production that can affect the availability of farm products and increase food price volatility. However, the share of food costs related to agricultural production has fallen over the years as food value chains have become more complex and food prices tied more closely to value added downstream in the supply chain. We calculate the magnitude and extension of agricultural price passthroughs to food ...
Journal Article
Is It Time to Add Food-at-Home Inflation to Measures of Core Inflation?
Since the mid-1970s, the Federal Reserve has used core inflation to examine trends in underlying inflation. Core inflation is considered a more stable measure as it excludes energy and food, historically viewed as the most volatile components of inflation. However, core inflation can be a challenge for central bankers to communicate, as food inflation is highly salient to consumers. We argue that food-at-home inflation has become less volatile over time and could be added to measures of core inflation with few drawbacks.
Journal Article
Some Segments of the Agricultural Economy Are Particularly Sensitive to Changes in the Foreign-Born Farm Labor Supply
For years, many segments of the U.S. agriculture sector have relied on foreign-born and undocumented workers to meet labor demand in farm operations. While farm operators may be able to partly reduce this reliance through investments in machinery and further hiring through the agricultural guest worker visa program, these alternatives would take time to deploy and could substantially increase costs.
Journal Article
How Mergers in the Farm Credit System Have Affected Ag Banks
Commercial banks and the Farm Credit System (FCS) have been the most important sources of agricultural loans in the United States in recent decades. Since the 1990s, however, mergers and acquisitions have increasingly concentrated both the FCS and commercial banks, raising concerns about potential effects on the agricultural credit market. Starting in the 2000s, the FCS gained a substantial market share of total agricultural debt, lending credibility to these concerns. Thus far, however, how the FCS’s evolving size and scope affect agricultural bank operations, particularly through mergers, ...
Journal Article
Not Bullish: U.S. Cattle Herds Hung Up on Higher Interest Expenses
Cattle inventories declined to historically low levels at the start of 2024. Cattle producers may facechallenges maintaining or restocking herds, as higher interest expenses on cattle and input purchases in2022–23 have constrained profit margins. Although feed costs have decreased slightly, higher costs forfinancing and other operating expenses could continue to put pressure on cattle production andprofitability.
Journal Article
Labor Constraints and Strong Demand Are Driving Robust Food Services Inflation
Although headline inflation has slowed in recent months, inflation for core services has remained elevated since the first half of 2021. Inflation for food services in particular has been significantly higher than inflation for goods and other services. We argue that food services inflation has been elevated by the sector’s fast rebound in expenditures and its high dependency on labor amid labor shortages and elevated labor costs.
Journal Article
Increased Loan Demand and Higher Interest Rates May Benefit Ag Banks
Extreme weather, geopolitical conflicts, supply chain disruptions, and rising interest rates all directly affectU.S. agriculture, which may in turn affect banks that make agricultural loans. Demand for loans from agbanks could rise following events that reduce net farm income or increase banks’ ability to reprice loans,such as supply chain disruptions or higher interest rates. But competition with other banks and nonbankfinancial institutions may offset some of these benefits.
Working Paper
An Experimental Analysis of Quality Misperception in Food Labels
The size and distribution of surplus in markets where credence quality attributes of food (e.g., organic, non-GMO) are conveyed through some informational mechanism (typically labels) crucially depend on 1) how information changes consumers’ perception of quality and 2) producers’ strategic choice of quality provision in response to changes in consumers’ perception of quality. This paper examines the hypothesis that consumers’ misperception of quality information can provide incentives to sellers to increase quality and offset the lower quality that exists in markets where firms ...
Journal Article
Tight Labor Markets Have Been a Key Contributor to High Food Inflation
Food inflation remains higher than measures of overall inflation, and labor markets have been tight. We find that processed food products have driven recent increases in grocery prices, and we argue that labor market tightness affects the prices of these labor-intensive products in particular through increases in production and distribution costs. Food inflation at grocery stores could remain elevated if price pressures on the supply side persist and demand for food at home remains strong.
Working Paper
The Supply and Demand of Agricultural Loans
Credit plays a critical role in the agricultural sector, but many studies suggest that farmers are credit constrained. We examine the degree to which changes in non-real-estate agricultural loans at commercial banks are driven by changes in supply and demand, using information provided by agricultural lending surveys conducted by the Federal Reserve Banks of Chicago, Kansas City, and Minneapolis. Building on recent studies of loan officer opinion surveys, we estimate the changes in agricultural loan supply and demand using an unbalanced panel of 1,024 banks across 191 quarters ...