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Revisiting Food Inflation, Ethanol and Idaho Potatoes

Published on: 16:22PM Jul 17, 2009

The chart of the week is Idaho potato acreage versus Idaho total corn and spring wheat acreage.  This note is a follow up from a blog post last year where I suggested that elevated grain prices were pulling acreage from other crops including potatoes. If you remember, 2008 Idaho potato acreage was the smallest in 30 years and, for the first time on record, corn acreage surpassed potato in the state. This year the trend is continuing although with less intensity. Idaho potato acreage this year is up fractionally but is still the 2nd smallest in the last 23 years. Corn acreage in the state is the third highest on record. My argument in last year’s blog was that ethanol was a major factor in this acreage shift in the state as increased ethanol output influenced corn demand and prices higher. And that food inflation was indeed occurring in part due to ethanol. Due to relatively lower grain prices this year, their draw from other crop acreage could lessen next year assuming we have good upcoming harvests. But alternative crop prices, like potatoes, are not likely to go back to prior 2008 levels unless corn and other grain prices do as well. By the way, 2009 fall US potato acreage is projected to be the 2nd smallest since 1951.

pot

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