January 2, 2014

Organic Food Popularity May be Impacting Food Price Inflation Calculations

A while ago Moneybox wrote Is Whole Foods Inflation or Growth?  discussing expansion of Whole foods and how it might relate to inflation.    He said : " But the question of whether or not humanely raised organic pork is "really" better than factory farmed pork does not strike me as especially something the Bureau of Labor Statistics is well-equipped to answer."   Now that raised an interesting point in my mind.  Does the BLS differentiate between organic foods and regular non-organic?   

I searched for 'organic' on the BLS site via Google and couldn't come up with anything about how organic foods are considered in the price index.   So I honestly don't know how organic food impacts the inflation index.   They might lump organic in with everything else or maybe they exclude organic from the index.   

IF the BLS doesn't differentiate between organic and regular foods then that could result in organic food increased popularity causing an increase in food price index.

The USDA has info on organic food popularity.   As of 2012 organic foods were about 4% of the grocery market.   Thats about double what it was a decade ago.    If we assume (for argument sake) that organic food costs double what regular food does then the increased popularity of organic food may increase inflation.   

The doubling of organic food purchases in the past 10 years might account for a +2% increase in food price indexes in that 10 year period.

Look at it this way:   Do food prices cost more or are we just seeing higher popularity among organic foods which are inherently more expensive?

Again, I don't  know exactly what the BLS does for organic foods.   Maybe they ignore it entirely and just don't count organic food prices. 

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