Supply and Demand of Grain in the United States Essay

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Market of Grain in the United States

In the United States, millions of Americans are confronting the latest trends in the commodities markets where the costs of agricultural products have driven up costs of breakfasts of average Americans. Over the past year, the price of orange juice has increased a quarter, and the price of milk has also risen by 5%, and egg by a fifth. The issues have made General Mills and Kellogg's to increase the prices of their breakfast cereal products. The cause of an increase is due to a recent rise in the price of grains such as wheat and corn. Underpinning the rise in the price of grains is that the demand has outpaced the supply because of the growing demand for cereals for the production of biofuels such as ethanol. Thus, the author is trying to reveal the factors that lead to an increase in the price of grain, which include the rise in the use of grains for the production of biofuels.

Moreover, the use of cereal in making biofuel has tripled since 2000 where ethanol distilleries consume a fifth of the U.S. corn making the demand of grain accelerating. In the 1990s, the demand for biofuel increased by 1.2% yearly. Ten years after, the demand for grain has increased by 1.4%, and will increase by 1.9% annually according to Goldman projects. In 2009, the demand for corn has exceeded the supply, moreover, farmers are growing lesser wheat pushing an increase in the price of corn up. An increase in the price of grain has also led to increasing in the prices of eggs because the grain used to feed poultry has become more expensive.

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Agflation is defined as an increase in the food prices because of the rise in demand for agricultural products that drives up the inflation. Thus, agflation is a combined word of agricultural products and inflation. The term inflation is the rise in the price of goods and services, thus, agflation is an increase in the prices of the agricultural products. The agflation is not due to an increase in money supply but an interaction in demand and supply. For example, when a demand of cereal is more than the supply, there will be an increase in the price of corn.

2. Major problem facing the market for crops

The major problem facing the market of crops is that the world is running short of certain categories of crops because of underproduction. Moreover, there has been a decline in the human consumption because of moderate growth of population. An increase in the production of biofuels has also increased the demand for cereals. These factors have made the demand for agricultural products to be greater than supply leading to….....

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Agricultural Commodities Biofuelled Grain Prices to go the way of the Oil Price. (2007, June 21). The Economist.

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