There is little correlation between commodity prices and inflation rates, said a group of agricultural economists writing at the farmdoc daily blog. “Current high inflation rates do not necessarily signal a continuing period of high commodity prices,” they said, pointing to “plateaus” when corn and soybeans cluster around long-term price averages.
“There have been periods in which inflation rates have been relatively high and commodity prices were low, as occurred in 1999,” wrote economists Gary Schnitkey, Krista Swanson, Nick Paulson, Jonathan Coppess and Jim Baltz of the University of Illinois, and Carl Zulauf of The Ohio State University. “Conversely, commodity prices reached all-time highs in 2011 and 2012, and inflation rates were relatively low.”
After bouts of high inflation in 1970s through the early 1980s, the U.S. inflation rate was low and relatively stable through 2020, said the economists. Meanwhile, corn and soybean prices were on a price plateau from 1973-2005, supported by increased global trade, and moved to a higher plateau in 2006, fueled by the ethanol boom. Season-average prices set records in 2012 and 2013 due to smaller than expected harvests and strong global demand.
“Previous changes in long-run prices are linked to long-run supply-demand changes” said the economists. “Currently, a factor causing a permanent or long-lasting supply-demand change has not been identified. Factors causing current higher prices are likely temporary.”