Current Price Topics

Grain Prices and Our

Grocery Bill

1

Producer Price Index: First Quarter 2011

U.S. Bureau of Labor Statistics May 2011 Volume 2, Number 2

History has a way of repeating itself. This is true 

when it comes to agricultural price changes, 

which are typically passed on to consumers. 

During the end of 2010 and into early 2011, we 

have seen grain prices reach historical highs. 

This is important to consumers, because grain 

products are the basic ingredients in many of 

the products we buy at our local grocery stores. 

So does this mean that the average person will 

have to spend more money on food?

The Producer Price Index (PPI) saw grain prices 

rise considerably—69.9 percent from July 

2007 to July 2008, and this high price level 

was sustained through the remainder of 2008. 

This inflation was due to multiple factors. For 

example, with gasoline prices reaching record 

highs, there was renewed interest in ethanol 

(made from corn) as an alternative fuel source. 

The potential gains from ethanol production 

brought speculators into the corn market in 

historic numbers. This introduced a great deal 

of new market demand, resulting in the price 

of corn increasing 80.4 percent from July 2007 

to July 2008. As corn prices reached historical 

highs, wheat prices followed a similar pattern, 

increasing 36.9 percent during the same 

period. The large jump in wheat prices was 

the result of poor weather conditions in 

2006 and 2007 that lowered stockpiles 14.0 

percent.1 Corn and wheat prices remained at 

Jan 2006 Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008 Jan 2009 Jul 2009 Jan 2010 Jul 2010 Jan 2011

-75

-25

25

75

125

175

Wheat Corn

Percent change

Chart 1. Twelve-month percent change in PPI for wheat and corn, not seasonally adjusted

SOURCE: U.S. Bureau of Labor Statistics
2

 C U R R E N T P R I C E T O P I C S

high levels until being overcome by the 2008 

global economic collapse. Corn and wheat 

price declines continued until the middle of 

2010, when the price of grains again increased 

dramatically, due to increased demand and 

speculation over poor foreign crop yields.2

 In 

February 2011, as the global economy continued 

to recover, grain prices reached levels similar to 

those seen in 2007 and 2008. (See chart 1.)

By March 2011, global grain prices, led by 

surging wheat and corn prices, were up 73.0 

percent from previous-year levels. Contributing 

to this run-up in prices, global wheat inventories 

were at low levels going into 2011, due to poor 

weather conditions in Russia, the EU, Canada, 

and Australia.3 This global short supply situation 

caused worldwide demand for wheat to shift 

to U.S. supplies, resulting in a domestic price 

increase of 53.8 percent from March 2010 to 

March 2011. During this time, corn prices also 

rose, because of high demand for ethanol and 

speculation of a poor South American corn crop.4

The combination of lower corn inventories and 

high demand resulted in an 82.5-percent price 

increase from March 2010 to March 2011.

Ingredients derived from grains are used in a 

variety of products, such as bread, pasta, baked 

goods, and other staples regularly purchased 

by consumers. Grains are also an important 

input for the production of animal feeds, which 

in turn influence the price of beef, pork, and 

chicken. Though grain prices were rising in both 

2007–2008 and 2010–2011, those price increases 

were not immediately or fully passed through 

to the PPI for processed foods and feeds. (See 

chart 2.) From March 2010 to March 2011, prices 

for processed foods and feeds increased 8.7 

percent—the largest 12-month advance since 

-60

-40

-20

0

20

40

60

80

100

-10

-5

0

5

10

15

Processed foods and feeds Grains

Percent change for grains

Percent change for processed 

foods and feeds

Chart 2. Twelve-month percent change in PPI for grains and for processed foods and feeds, 

not seasonally adjusted

SOURCE: U.S. Bureau of Labor Statistics

Jan 2006 Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008 Jan 2009 Jul 2009 Jan 2010 Jul 2010 Jan 2011
3

 C U R R E N T P R I C E T O P I C S

a 9.0-percent rise in October 2008. In 2008, 

when the increase in grain prices worked its way 

through the economy and eventually affected 

prices for processed foods and feeds, inflation 

for processed foods and feeds peaked at 12.5 

percent in July of that year. But as the economic 

recession took its toll and the economy 

contracted, grain prices fell. Prices for processed 

foods and feeds followed suit, dropping 6.1 

percent from August 2008 to August 2009. By 

January 2010, processed foods and feeds prices 

had rebounded to register a 1.2-percent yearover-year increase, as the economy recovered 

and worldwide demand for grains became more 

robust. The processed foods and feeds recovery 

continued through March 2011, resulting in a 

12-month change of 8.7 percent.

Knowing how high grain prices have affected 

consumer food prices in the past, analysts view 

the recent trend as an indication that higher 

grocery prices are at hand. Although grain 

prices tend to be more volatile than prices for 

processed foods and feeds and for consumer 

foods, since grain prices only represent about 

12 cents of every dollar of food purchased5

 the 

price trends tend to be similar. A comparison 

of the PPI for processed foods and feeds and 

Consumer Price Index (CPI) food at home 

demonstrates how changes in the processed 

foods and feeds index usually have an impact on 

the amount consumers pay for food at home 3 

to 4 months later. (See chart 3.) As mentioned, 

from March 2010 to March 2011, grain prices are 

up 73.0 percent; and processed foods and feeds 

prices are up 8.7 percent. Looking back to 2008, 

it took about 5 to 6 months for the increase in 

the price of grains to fully show up on our tables 

at home. The most recent surge in grain prices 

began in August 2010, with processed food 

-10

-5

0

5

10

15

PPI for processed foods and feeds

CPI for food at home

Percent change

Chart 3. Twelve-month percent change for PPI processed foods and feeds and for CPI food 

at home, not seasonally adjusted

SOURCE: U.S. Bureau of Labor Statistics

Jan 2006 Jul 2006 Jan 2007 Jul 2007 Jan 2008 Jul 2008 Jan 2009 Jul 2009 Jan 2010 Jul 2010 Jan 2011
4

prices first showing the effects in September 

2010, and consumer food prices beginning 

to rise in January 2011. Should we prepare for 

additional higher food costs in the next 3 to 5 

months? We cannot say for sure, but history has 

shown that trends in grain prices eventually have 

an impact on consumer food prices.

The PPI for finished goods increased 3.1 percent 

in the first quarter of 2011, compared with a 

2.2-percent advance in the fourth quarter of 

2010. Leading this acceleration, prices for goods 

other than foods and energy moved up 1.0 

percent from December 2010 to March 2011, 

after inching down 0.1 percent in the prior 

 C U R R E N T P R I C E T R E N D S

Current Price Trends

First Quarter

2011 Producer Inflation

Trends Higher

quarter.6 Within the finished core,7 a first-quarter 

upturn in motor vehicle prices led reversals in 

the indexes for both capital equipment and 

consumer durable goods. (Industrial production 

of motor vehicles and parts fell 3.8 percent in the 

fourth quarter of 2010 and rose 8.9 percent in the 

first 2 months of 2011.)8 In addition, the index for 

finished consumer foods climbed 4.0 percent in 

the first quarter of 2011, following a 2.2-percent 

rise for the 3 months ended in December. This 

faster rate of increase can be traced to prices 

for processed consumer foods, such as meats

and dairy products. In contrast, the index for 

finished energy goods increased at a slightly 

slower rate in the first quarter of 2011 than it had 

in the preceding quarter—7.8 percent and 8.4 

percent—respectively. (See chart 4.)

The index for intermediate goods rose 4.7 

percent in the first quarter, after moving up 3.2 

Chart 4. Three-month percent change in PPI for overall, food, energy, and core finished 

goods, seasonally adjusted

SOURCE: U.S. Bureau of Labor Statistics

Overall Food Energy Core

2. .2

8.4

-0.1

3.1

4.0

7.8

1.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Percent change

Sep 10 - Dec 10 Dec 10 - Mar 11

2 2
5

 C U R R E N T P R I C E T R E N D S

percent from September to December. About 

two-thirds of this faster rate of advance can 

be attributed to prices for intermediate goods 

other than foods and energy, which climbed 

3.1 percent in the first quarter of 2011, after 

increasing 1.7 percent in the fourth quarter 

of 2010. Pronounced quickening in inflation 

for both durable and nondurable materials 

for manufacturing, combined with moderate 

acceleration in prices for components for 

manufacturing and business supplies, drove the 

faster rate of increase. The index for intermediate 

energy goods rose at a slightly faster rate than in 

the prior quarter—9.3 percent compared with 

7.9 percent. Over the last 2 calendar quarters, 

continued gains in prices for crude petroleum

and basic industrial materials have contributed 

to index gains for intermediate core and 

intermediate energy goods. Worldwide, market 

expectations for improved economic growth 

have resulted in advancing material input prices.9

Surging prices for dairy products and meats were 

responsible for the first quarter 2011 acceleration 

in the index for intermediate foods and feeds. 

(See chart 5.)

Unlike index movements for finished and 

intermediate goods, price increases for crude 

materials for further processing moderated to 

6.2 percent for the 3 months ended in March, 

compared with a 13.0-percent jump the previous 

quarter. Smaller advances in the indexes for 

energy materials and crude nonfood materials 

less energy outweighed faster gains in prices for 

foodstuffs and feedstuffs. A significant portion 

of the deceleration in crude goods prices can be 

linked to the index for crude petroleum. Crude oil 

prices surged 42.8 percent in the final quarter of 

2010 and rose at a much slower, 6.2-percent rate 

in the first quarter of 2011. (See chart 6.)

3.2

4.0

7.9

1.7

4.7

5.3

9.3

3.1

0.0

2.0

4.0

6.0

8.0

10.0

Percent change

Sep 10 - Dec 10 Dec 10 - Mar 11

Chart 5. Three-month percent change in PPI for overall, food, energy, and core intermediate 

goods, seasonally adjusted

SOURCE: U.S. Bureau of Labor Statistics

Overall Food Energy Core
6

 C U R R E N T P R I C E T R E N D S

Finished goods

The Producer Price Index for finished goods

advanced 3.1 percent in the first quarter 

of 2011, after moving up 2.2 percent from 

September to December. Accounting for over 

three-quarters of this acceleration, prices for 

finished goods less foods and energy turned 

up 1.0 percent from December to March 

subsequent to a 0.1-percent decline in the 

prior quarter. Also contributing to the faster 

rate of increase in finished goods prices, the 

index for finished consumer foods advanced 

4.0 percent for the 3-month period ended 

in March, following a 2.2-percent gain from 

September to December. By contrast, price 

increases for finished energy materials slowed 

to 7.8 percent in the first quarter of 2011, from 

8.4 percent for the previous 3-month period.

From December to March, the index for 

finished goods less foods and energy turned 

up 1.0 percent, compared with a 0.1-percent 

decline in the last quarter of 2010. Prices for 

light motor trucks rose 0.8 percent for the 

3-month period ended in March following 

a 3.1-percent decrease in the preceding 

quarter. Similarly, the indexes for passenger 

cars, nonwood commercial furniture, sporting 

and athletic goods, and sanitary paper 

products also turned up in the first quarter 

of 2011. Prices for consumer plastic products

advanced at a faster rate, compared with 

the 3-month period ended in December. 

By contrast, the index for cigarettes was 

unchanged from December to March, after 

increasing 3.0 percent from September to 

December. Prices for aircraft and aircraft 

13.0

4.3

24.0

9.5

6.2

11.7

2.4

3.9

0.0

4.0

8.0

12.0

16.0

20.0

24.0

28.0

Percent change

Sep 10 - Dec 10 Dec 10 - Mar 11

Chart 6. Three-month percent change in PPI for overall, food, energy, and core crude 

goods, seasonally adjusted

SOURCE: U.S. Bureau of Labor Statistics

Overall Food Energy Core
 

 7

 C U R R E N T P R I C E T R E N D S

equipment turned down in the 3-month 

period ended in March.

The index for finished consumer foods climbed 

4.0 percent from December to March, following 

a 2.2-percent rise in the fourth quarter of 2010. 

About two-thirds of this acceleration was due 

to rising prices for fresh and dry vegetables, 

which jumped 32.9 percent subsequent to 

advancing 8.7 percent in the 3-month period 

ended in December. The indexes for soft drinks

and for sugar and confectionary products also 

increased at faster rates, compared with the 

prior quarter. Prices for dairy products and for 

beef and veal turned up in the first quarter of 

2011. Conversely, the index for fresh fruits and 

melons fell 21.0 percent in the 3-month period 

ending in March, following a 33.4-percent jump 

from September to December. Prices for eggs 

for fresh use and head rice also turned down in 

the first quarter of 2011.

The index for finished energy goods moved up 

7.8 percent in the first quarter of 2011. Finished 

energy increases were broad-based with higher 

prices for gasoline, home heating oil, liquefied 

petroleum gas, diesel fuel, residential electric 

power, kerosene, finished lubricants, and jet fuel.

Intermediate goods

The Producer Price Index for intermediate 

materials, supplies, and components rose 

4.7 percent for the 3-month period ended 

March 2011, subsequent to a 3.2-percent 

increase for the 3 months ended in December 

2010. This acceleration was led by prices for 

intermediate goods less foods and energy, 

which advanced 3.1 percent in the first 

quarter of 2011, following a 1.7-percent rise 

in the prior 3-month period. Similarly, the 

indexes for intermediate energy goods and for 

intermediate foods and feeds increased more 

from December to March than they had in the 

fourth quarter of 2010.

Prices for intermediate goods less foods and 

energy moved up 3.1 percent in the first 

quarter of 2011, compared with a 1.7-percent 

rise from September to December 2010. 

Leading this faster rate of advance, the index 

for steel mill products jumped 12.4 percent, 

after a 0.5-percent rise in the prior 3-month 

period. Prices for industrial chemicals, yarns, 

fabricated structural metal products, and for 

plastic resins and materials also increased more 

than in the previous quarter. By contrast, the 

index for metal cans and components turned 

down 7.7 percent from December to March, 

after rising 8.7 percent for the 3 months 

ended December 2010. Prices for nonferrous 

mill shapes and for nonferrous wire and cable

advanced less than they had a quarter earlier.

Intermediate energy goods prices rose 9.3 

percent for the 3 months ending in March 

following a 7.9-percent advance in the 

previous 3-month period. The index for jet 

fuel accounted for most of this acceleration, 

surging 31.6 percent in the first quarter 

of 2011, after rising 13.7 percent in the 

preceding 3-month period. Diesel fuel prices 

also advanced more from December to March 

than they had from September to December. 

The indexes for asphalt, utility natural gas, 
 C U R R E N T P R I C E T R E N D S

8

and electric power turned up after declining 

in the fourth quarter of 2010. By contrast, 

prices for liquefied petroleum gas rose less in 

the first quarter than they had in the prior 3 

months, moving up 8.1 percent, subsequent to 

a 29.6-percent jump. The indexes for lubricating 

oil base stocks and residual fuels also increased 

less than in the fourth quarter of 2010.

The index for intermediate foods and feeds

moved up 5.3 percent for the 3 months 

ending in March, compared with a 4.0-percent 

advance in the previous 3-month period. 

The index for dairy products turned up 8.4 

percent in the first quarter after falling 2.5 

percent from September to December. Prices 

for beef and veal also rose after decreasing in 

the fourth quarter. The indexes for sugar and 

confectionery products and for shortening 

and cooking oil rose more in the first quarter 

than they had from September to December. 

Conversely, the formula feeds index increased 

3.7 percent, compared with a 19.5-percent 

jump in the prior 3 months. Prices for soybean 

cake, meal, and other byproducts and for flour 

and flour base mixes and doughs also rose less 

than in the fourth quarter. The index for head 

rice turned down from December to March, 

after advancing in the prior 3-month period.

Crude goods

The Producer Price Index for crude materials 

for further processing increased 6.2 percent 

in the 3 months ended March 2011, following 

a 13.0-percent advance from September to 

December 2010. Leading the deceleration 

in crude goods prices, the rise in the crude 

energy index slowed to 2.4 percent from a 

24.0-percent jump in the 3-month period 

ending in December 2010. The index for crude 

nonfood materials less energy also moved up 

less, advancing 3.9 percent from December to 

March, after climbing 9.5 percent in the previous 

quarter. By contrast, the rise in the index for 

crude foodstuffs and feedstuffs accelerated to 

11.7 percent during the first quarter of 2011, 

from 4.3 percent in the final quarter of 2010.

The index for crude energy materials rose 2.4 

percent from December 2010 to March 2011, 

compared with a 24.0-percent climb for the 3 

months ended December 2010. Crude petroleum

prices moved up 6.2 percent in the first quarter, 

following a 42.8-percent jump in the preceding 

quarter. The natural gas index turned down 

4.7 percent, after rising 8.6 percent between 

September and December 2010. Conversely, 

prices for coal advanced 2.8 percent in the 

first quarter of 2011, following a 1.6-percent 

increase in the fourth quarter of 2010.

The index for crude nonfood materials 

less energy moved up 3.9 percent from 

December 2010 to March 2011, subsequent 

to a 9.5-percent advance in the previous 

quarter. About two-thirds of this deceleration 

can be attributed to corrugated wastepaper

prices, which declined 29.1 percent in the 

first quarter, following a 69.9-percent surge 

in the 3 months ended December 2010. 

The indexes for plant and animal fibers and 

for stainless and other alloy steel scrap also 

turned down, after rising in the fourth quarter 

of 2010. Prices for nonferrous metal ores, 
 C U R R E N T P R I C E T R E N D S

grains, and copper base scrap advanced less 

in the first quarter of 2011 than they had from 

September to December. By contrast, price 

increases for carbon steel scrap accelerated to 

13.6 percent in the first quarter of 2011, from 

5.8 percent in the previous quarter. The index 

for high grade wastepaper turned up for the 3 

months ended March 2011, after declining in 

the previous 3 months.

The advance in the crude foodstuffs and 

feedstuffs index accelerated to 11.7 percent 

for the 3 months ended March 2011, from 4.3 

percent for the 3 months ended December 2010. 

This faster rate of advance was led by slaughter 

livestock prices, which turned up 17.8 percent in 

the first quarter, following a 1.9-percent decline 

in the fourth quarter. Similarly, the indexes for 

fluid milk and slaughter poultry also increased 

in the first quarter of 2011, after declining 

from September to December. Prices for fresh 

vegetables, except potatoes advanced more 

than in the last quarter of 2010. Conversely, the 

grains index rose 3.1 percent in the 3-month 

period ended in March, following a 20.3-percent 

gain from September to December. Prices for 

oilseeds also advanced less in the first quarter 

of 2011 than they had in the preceding quarter. 

The indexes for fresh fruits and melons and Irish 

potatoes for processing turned down in the 

3-month period ending in March, after rising in 

the final quarter of 2010.

Trade industries

The PPI for the net output of total trade 

industries increased 1.9 percent in the first 

quarter of 2011, following a 0.2-percent 

decline in the fourth quarter of 2010. 

(Trade indexes measure changes in margins 

received by wholesalers and retailers.) 

Almost half of this upturn can be traced to 

margins received by merchant wholesalers 

of nondurable goods, which advanced 2.3 

percent from December to March, after 

falling 2.4 percent in the prior quarter. Margin 

indexes for supermarkets and other grocery 

stores, warehouse clubs and supercenters, 

gasoline stations, non-discount department 

stores, and new car dealers also moved up, 

following decreases in the preceding quarter. 

Conversely, margins received by discount 

department stores dropped 7.2 percent in the 

first quarter of 2011, after rising 16.4 percent 

from September to December 2010. The 

margin index for women’s clothing stores also 

turned down in the first quarter.

Transportation and warehousing industries

The PPI for transportation and warehousing 

industries increased 4.8 percent in the first 

quarter of 2011, after moving up 1.2 percent 

in the previous quarter. Over 40 percent of 

this acceleration is attributable to prices 

received by the scheduled air transportation

industry group, which climbed 11.3 percent, 

following a 2.7-percent rise in the fourth 

quarter of 2010. The industry indexes for 

the trucking sector, couriers, and linehaul railroads also advanced more from 

December to March than they had in the prior 

quarter. Conversely, the index for pipeline 

transportation of crude oil fell 8.2 percent in 

the first quarter of 2011, after edging down 

0.1 percent from September to December. 

9
 C U R R E N T P R I C E T R E N D S

Prices received by the industries for 

nonscheduled air freight chartering, general 

warehousing and storage, and marine cargo 

handling turned down, after increasing in the 

preceding quarter.

Traditional service industries

The PPI for the net output of total traditional 

service industries increased 0.5 percent from 

December to March, following a 0.3-percent 

advance from September to December. 

Leading this acceleration, prices received 

by insurance carriers rose 1.1 percent, after 

inching up 0.1 percent in the previous quarter. 

The index for offices of lawyers climbed in the 

first quarter following no change in the fourth 

quarter. Prices received by the industries for 

accommodation, commercial machinery repair 

and maintenance, and automotive equipment 

rental and leasing turned up after falling in 

the prior quarter. In contrast, the index for 

the commercial banking industry declined 

3.4 percent in the first quarter, following no 

change in the fourth quarter. Prices received 

by general medical and surgical hospitals rose 

less in the first quarter, and the index for wired 

telecommunications carriers turned down, 

after rising in the fourth quarter.

Additional information is available from the 

PPI Section of Index Analysis and Public

Information, at ppi-info@bls.gov or at

(202) 691-7705.

Notes

1

 National Agricultural Statistics Service (NASS), Agricultural Statistics Board, U.S. Department of Agriculture. Grain Stocks 

Report. January 11, 2008: http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1079.

2 Feedstuffs: The Weekly Newspaper for Agribusiness. “Holidays bring volatile trading.” Fatka, Jacqui. Issue 53, Volume 82. 

December 27, 2010: http://www.feedstuffs.com.

3

 Foreign Agricultural Service, U.S. Department of Agriculture. Grain: World Markets and Trade. February 2011: http://usda.

mannlib.cornell.edu/usda/fas/grain-market//2010s/2011/grain-market-02-09-2011.pdf.

4

 Foreign Agricultural Service, U.S. Department of Agriculture. Grain: World Markets and Trade. February 2011: http://usda.

mannlib.cornell.edu/usda/fas/grain-market//2010s/2011/grain-market-02-09-2011.pdf.

5

 Economic Research Service, U.S. Department of Agriculture. A Revised and Expanded Food Dollar Series A Better Understanding 

of Our Food Costs. February 2011: http://www.ers.usda.gov/Publications/ERR114/ERR114_ReportSummary.pdf.

6

 Price movements for PPIs described in this text include preliminary data for the months of December 2010 through March 2011. 

All PPI data are recalculated 4 months after original publication, to reflect late data received from survey respondents. In addition, 

seasonally adjusted PPIs are recalculated, on an annual basis, for 5 years, to reflect more recent seasonal patterns.

7

 Within the PPI stage-of-processing structure, indexes for goods other than foods and energy commonly are referred to as the core 

indexes.

8 Industrial Production and Capacity Utilization, G.17 (419), March 17, 2011, Board of Governors of the Federal Reserve System, 

table 5, available on the Internet at http://www.federalreserve.gov/releases/g17/20110317/ (visited April 14, 2011).

9 “Global Economic Prospects, Navigating Strong Currents,” volume 2, January 2011, (pp. 1-4), The World Bank, available on the 

Internet at http://siteresources.worldbank.org/INTGEP/Resources/335315-1294842452675/GEPJanuary2011FullReport.pdf

(visited Apr. 14, 2011).

10