During the previous spike in commodity and energy prices in 2007 and 2008, the CPI for food rose by an average of 4.7 percent over the two years. The Economic Research Service has increased its forecast for the all food CPI to 3-4 percent for 2011. This

could mean year-over-year inflation rates in excess of this average in the latter part of 2011.

Conclusions

At the Agricultural Outlook Forum in 2008 there was much consternation about high commodity prices, increasing energy costs, food price inflation, and the strength of domestic and foreign demand. Three years later, markets are again very tight, particularly for feed grains and oilseeds.

While it is often said that the cure for high prices is high prices, even with additional supplies expected this year, it is likely that the tight stocks to use situation will not be entirely mitigated over the course of one or even two growing seasons. This will mean continued high costs for feed which will keep margins for livestock producers at low levels.

In the short-run, much uncertainty remains and with tight markets, price volatility is expected for most markets. In part, the outlook for 2011 will depend on the progress in global economic growth.

The International Monetary Fund is projecting would output will grow by 4.4 percent with advanced economies projected to grow at 2.5 percent and emerging and developing economies projected to grow at 6.5 percent. Leading the way is China with a projected growth rate of 9.6 percent. Similarly, the Economic Research Service projects world per capita real income will increase by 2.3 percent in 2011, double the average growth rate of 1.1 percent from 2001 to 2010.

Looking over the longer-term, the past 6o years have been characterized by increased agricultural productivity and declining real prices for most agricultural commodities. Whether the current period marks a turning point will depend largely on whether over the long run productivity gains will continue to offset the growth in demand caused by rising population and income.