Present Population Link
I wanted to see if prices of crops such as wheat, soybeans, and corn had kept up with inflation. Used 1974 as my base year because it was the year I moved to a farm in Illinois. From charts at Moore Research attempted to determine prices a bit off the highs for the year(1974). For wheat used $5, soybeans used $8, and for corn used $3. From the link above(Inflation Calculator) to present day adjusted prices of Wheat $22.14, Soybeans $38.43, and Corn $13.28.
To find production gains in the various crops looked at two sites associated with USDA. Both are listed above. Used yield per acre as my productivity measure. Employed a 5-year average to smooth the data. My 5-year average from 1974 Wheat 31.3, Soybeans 26.7, and Corn 84.1. Using data through September 2010 crop report 2010 5-year averages are Wheat 43, Soybeans 42.6, and Corn 156.18. Percentage gains in productivity from 1974 was Wheat 38%, Soybeans 60%, and Corn 86%.
One way to examine the productivity gains versus inflation would be to decrease the overall inflation increase in price by the productivity increase. Wheat $20.24, Soybeans $33.6, and Corn $10.70.
However the way I prefer is to compare productivity gains is versus population growth and then adjust for inflation. (In my opinion crops are generally grown for human consumption(food, energy, pets, etc.)). Using population links from above found 4 billion people in 1974(rounded up) rose to 7 billion people in 2010(rounded down). The extra 3 billion people were a 75% increase in population. Comparing productivity gains to population growth only corn kept up, Wheat -37%, Soybeans -15%, and Corn +11%.
Adjusting the inflation numbers for crop prices, to productivity versus population growth gives another set of number for crop prices. Wheat $24, Soybeans $39.6, and Corn $12.96
One could say even with productivity factored in, present grain prices are cheap compare to inflation adjusted prices. $5 T-bone steaks are a bargain.
Re: a bargain
problem is $ 5.00 t-bones won't support $ 13.28 corn and until t-bones go to 12.00 or higher the numbers are worthless.. I can't see the general public paying $110.00 for a steak dinner (45.00 now with 7.50 t-bones) at their favorite restaurant in this economy...
Re: a bargain
You've gone several steps further with these numbers than I have, and for that I thank you.
I think the crucial numbers to examine in relationship to the apparent 'bargains' are the trendlines for real wages vs productivity. I'll guess that it would reveal that wages have stagnated or declined, meaning the benefits of productivity have not gone to wage earners. In turn it tends to suggest that wage earning consumers cannot be the source of an economic resurgence. Meanwhile, wealthy individuals, businesses, and financial houses park cash waiting for consumption to rise which would stimulate production and investment opportunities.
It will be a slow recovery.
Re: a bargain
We are indirectly supporting lower wage workers. Non-union blue collar people haven't come close to keeping up with inflation. A small example: 20 years when my mother was in a nursing home the nursing aids made about $8 per hour. Last year when a land lord spent some time in a home they made $11 an hour. The kicker is that the cost per month was under 2K 20 years ago vs. $8k a month today. Not counting medications. Where's all the money going?
Re: a bargain
Thanks for your efforts,rite on in your math. We also can all thank free trade for the third world sitsuation we are in today,I wonder if the powers that be are going to push this low ball bull$!++ to the point that some of their other favorite stocks such as JD,cat,or even the big chems,are forced into a meltdown.My biggest complaint is the margins sucked up by the inbeweeners,(proccesors,packaging,retailers,and the unionized transporters of finished goods) have kept up with inflation,all while commoditie producers can seemingly go to H#!!.