Monday, December 29, 2008

Today's Fly Or Die Commerce Report: Agflation Defined

According to Investopedia, agflation is: "An increase in the price of food that occurs as a result of increased demand from human consumption and use as an alternative energy resource.


The term is derived from a combination of the words 'agriculture' and 'inflation.'

Interest in alternative energies contributes to agflation. In order to produce biofuel (such as biodiesel and ethanol), manufacturers need to use food products such soybeans and corn. This creates more demand for these products, which causes their prices to increase. Unfortunately, these price increases spread to other non-fuel related grains (such as rice and wheat) as consumers switch to less expensive substitutes for consumption.

Furthermore, agflation will also affect non-vegetative foods (eggs, meat and dairy) as the price increases for grain will make livestock feed more expensive as well."

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