Impact of Commodity Prices on the Consumer
Monday, June 20, 2011 at 02:23PM In the chart below we have calculated the cumulative daily price change of the major food and energy commodities in the CRB index (Corn, Soy, Wheat, Cattle, Hogs, Oil and Natural Gas) since the beginning of 2008. We then multiplied the changes by the annual per capita consumption of each item. When the line is in the red zone, commodity prices are acting as a tax on consumers, and when it is in the green zone, commodity prices are acting as a windfall. While this method may oversimplify the actual costs, it provides a good idea of how changes in commodity prices have impacted consumers' wallets over the last three and a half years.
From the start to the middle of 2008, the rapid increase in commodity prices was a huge hit to the consumer. In the span of less than a year, consumers were spending an average of $4.77 per person per day more than they were at the start of the year because of the rise in commodity prices. The peak in '08 was followed by an equally rapid decline through early 2009. What was once a massive indirect tax on consumers quickly turned into a windfall of close to $5 per person per day.
After bottoming out in early 2009, commodities once again began an upward climb, but this time the increase was much more gradual in nature. In the span of more than two years, the entire benefit (and then some) of lower commodity prices had been erased. When the CRB peaked this April 29th, prices were acting as a tax on consumers to the tune of 76 cents per person per day versus 2008 levels. Since then, however, the drop in commodities has turned back into a net positive for consumers. The net result is that compared to the start of 2008, Americans are spending 82 cents less per person per day for a constant basket of commodities.
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