Food boom may bring cheaper prices, says US professor

Tom Hertel, founder of the Global Trade Analysis Project and professor at Purdue University in the U…

Tom Hertel, founder of the Global Trade Analysis Project and professor at Purdue University in the United States, is challenging the basic economic notion of supply and demand by stating that despite an impending food boom, prices of food will get cheaper.

As part of his research, Hertel has run an economic model that analyses food prices over the next 50 years. According to his research, the price of corn in North America in 1900 was three times what it was in the year 2000 in CPI adjusted terms.

Hertel’s findings indicate that food prices will decline around 80 percent of the time over the next 50 years, and that innovation in productivity will help farmers stay profitable as opposed to an increase price.

"That's why prices have declined over the last century, because agriculture has remained a profitable industry for those on the cutting edge,” says Hertel.

"As a result, we see continued investment in places like Australia and the US and continuing productivity growth.

"We can't just look at prices to deduce profitability."