Agflation

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. Alternative Energy ETF

    An exchange-traded fund that invests in companies engaged in ...
  6. Feed Ratio

    The relationship between the price for which a unit of livestock ...
Related Articles
  1. Markets

    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. Trading

    Grow Your Finances In The Grain Markets

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

    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 ...
  4. 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.
  5. ETFs & Mutual Funds

    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.
  6. Markets

    What's Next for Whole Foods? (WFM)

    Whole Foods market posted mixed results this quarter and the stock price increased.
  7. Markets

    Who Produces The World’s Food?

    While the planet’s food basket contains no single commodity that the entire world consumes, its ingredients are very similar.
  8. Markets

    3 Economies Benefiting From Biofuels

    Learn about what the largest biofuel-producing countries are achieving and how these fuels are helping their economies through jobs and waste reduction.
  9. Markets

    What is the Income Effect?

    In economics, the income effect is the change in the consumption of goods caused by a change in income, whether income goes up or down.
  10. Markets

    Whole Foods, Price Gouging And Sky-High Margins

    Over the years Whole Foods Market has grown to have more than 360 stores in the US and abroad. However, this company is not without its critics.
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. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  2. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  3. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  4. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  5. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  6. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
Trading Center