DEFINITION of 'Agflation'

An increase in the price of food that occurs as a result of increased demand from human consumption and use as an alternative energy resource. While the competitive nature of retail supermarkets allows some of the effects of agflation to be absorbed, the price increases that agflation causes are largely passed on to the end consumer. The term is derived from a combination of the words "agriculture" and "inflation".

BREAKING DOWN 'Agflation'

Interest in alternative energies contributes to agflation. In order to produce biofuel (such as biodiesel and ethanol), manufacturers need to use food products such soybeans and corn. This creates more demand for these products, which causes their prices to increase.

Unfortunately, these price increases spread to other non-fuel related grains (such as rice and wheat) as consumers switch to less expensive substitutes for consumption. Furthermore, agflation will also affect non-vegetative foods (eggs, meat and dairy) as the price increases for grain will make livestock feed more expensive as well.

RELATED TERMS
  1. Commercial Grain Stock

    The current amount of harvested grain crops stored domestically, ...
  2. Substitution Effect

    The idea that as prices rise (or incomes decrease) consumers ...
  3. Biofuel

    A type of energy derived from renewable plant and animal materials. ...
  4. IMF Nonfuel Commodity Index

    An index of nonfuel commodities developed and maintained by ...
  5. Renewable Resource

    A substance of economic value that can be replaced or replenished ...
  6. Alternative Energy ETF

    An exchange-traded fund that invests in companies engaged in ...
Related Articles
  1. Investing

    Debunking Biofuels: Do They Really Raise Food Prices?

    Learn about the two sides of the argument on the effect biofuels have on food prices and about other factors that affect food prices.
  2. Investing

    The Biofuels Debate Heats Up

    Interest in these new energy sources is growing. Should you buy in?
  3. Investing

    Grow Your Finances In The Grain Markets

    Hedging with futures can protect those who buy and sell commodities from adverse price movements.
  4. Insights

    These Companies Are Poised for Growth as Global Population Growth Comes Online

    While there are many concerns about population growth putting pressure on natural resources such as water and energy, these increased demands can spell profits for certain companies that can ...
  5. Managing Wealth

    Farmers Markets—Gaining Ground in Grocery Sector

    Farmers markets have gained a solid foothold in the grocery sector, but it seems that large retailers will retain the lion's share of the industry.
  6. Managing Wealth

    Clean Or Green Technology Investing

    Innovations in energy and consumption grow as companies adopt them to reduce costs.
  7. Trading

    Spotlight On The Solar Industry

    Before you buy into the hype, learn how the industry works and how to spot the winners.
  8. Investing

    The Top 3 ETFs For Investing in Grains (JJG, GRU)

    Learn about how investors can use exchange-traded funds (ETFs) and exchange-traded notes (ETNs) to obtain exposure to potential profits available in the grain markets.
  9. Insurance

    How To Eat Healthy Food And Save Money

    With the organic food market continuing to thrive, we look at ways in which the modern consumer can cut his or her costs while still eating healthy food.
  10. Investing

    What's Next for Whole Foods? (WFM)

    Whole Foods market posted mixed results this quarter and the stock price increased.
RELATED FAQS
  1. How does scarcity affect global agriculture stocks?

    Explore how scarcity affects the price of agricultural stocks. Learn how the price of agricultural commodities is closely ... Read Answer >>
  2. What countries are driving most of the growth of the food and beverage sector?

    Learn about the countries, primarily emerging market nations, that are currently driving most of the growth in the food and ... Read Answer >>
  3. What emerging markets are best positioned to benefit from growth in the food and ...

    Examine emerging market economies and learn which ones are currently projected to offer the highest growth rates for the ... Read Answer >>
  4. What's the difference between the substitution effect and price effect?

    Learn how the increase in an item's price affects consumer demand. Explore the differences between the substitution and price ... Read Answer >>
  5. What's the difference between the income effect and the substitution effect?

    Learn more about the income effect and substitution effect in economics. Find out how these two principles impact consumer ... Read Answer >>
  6. Who are Whole Foods' (WFM) main competitors?

    Learn more about Whole Foods Markets, who insists its products are sustainable. Thanks to the competition, however, its marketing ... Read Answer >>
Hot Definitions
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  3. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  4. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  5. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  6. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
Trading Center