This graph plots the ten most recent years of world Food Price Index data from the UN Food and Agriculture Organization (FAO) and the monthly average oil price from the US Energy Information Agency (EIA). [source] Note that graph shows data through November 2010. [Current FAO food basket is 215.]
h/t: Thanks to my friend Jason Bradford for posting the above graph done by Paul Chefurka.
Comments about Food/Oil Graph
Until I saw this graph, I would have expected the food price index to lag oil prices. The other surprise was how very closely the two matched each other when plotted together. How I'd love to see a graph of these values spanning several decades.I find the divergences in the prices between the FAO food basket and oil interesting.
Note that food has become more expensive relative to oil since the financial crisis as compared to the earlier part of the decade. In part, this may be due to the demand destruction and oversupply of oil which lasted for some time following the crisis although there was also demand destruction going on in the agricultural commodities at the same time. Though both sectors are affected by the dynamics of supply and demand, the fact that OPEC nations exceed their production goals during difficult economic periods may also account for some of the divergence.
One can see that the biofuels demands and perhaps speculation are affecting the picture recently as the food price index has significantly surpassed the oil price. I've noted a number of times here on this blog that the FAO food basket's current price rise can largely be attributed to sugar, oils, and coarse grains (driven by corn prices driven by the ethanol program). It is no coincidence that coarse grains, oils and sugar cane are inputs for global biofuels production.
Government policies of taxation and subsidizations, the health of the global economy, currency fluctuations, plus weather and geopolitics would be additional influences on both food and oil prices.
I hope to comment more on the factors to consider which will determine how this subject of oil depletion, availability, and high prices might play out as related to agricultural production when I have time.....