The Agricultural Product Prices Conundrum

Why have prices of agricultural products been low historically as compared to those of other products? Take for example the comparative prices of gold and wheat in the USA over the past century. The price of wheat increased from $1.11 per bushel in 1923 to $6.79 per bushel in 2023 which is an increase of 510% over the past century. Whereas the price of gold increased from $20.67 per troy ounce to $1835.9 per troy ounce in 2023 which is an increase of 8782%. The production of wheat went up in the same period by 111% while the total stock of gold in the USA went up by 233%. The population in the USA increased by 204% in this time. The production to population ratio for wheat, which was 7 bushels per capita in 1923 has dropped to 4.9 bushels per capita in 2023 whereas the stock to population ratio for gold which was 0.000134 troy ounce per capita in 1923 has risen to 0.000147 troy ounce per capita in 2023. Consequently, given the fact that the availability of wheat per capita has gone down and the availability of gold per capita has gone up in the USA one would expect the inflation in the price of wheat to be greater than that in the price of gold!! However, instead the inflation in the price of gold greatly exceeds the inflation in the price of wheat. The consumer price index in the USA was 17.1 in 1923 and has since risen to 307.8 in 2023 which is a rise of 1700%. Thus, while the rise in the price of wheat has lagged the rise in CPI by 1190%, the rise in the price of gold has topped the rise in CPI by 7082%.

Clearly, the prices of agricultural products have been suppressed by Governments in the USA and elsewhere by various means, mainly subsidies, so as to keep food prices and wages low. While, keeping food prices low is a legitimate objective, but it should not be at the expense of farmers and so the level of subsidy to them needs to increase.