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The Food Price Index measures the average price of food and the factors that cause prices to change. It averages five figures: cereals, sugar, oils and fats, meats, and dairy products. The index is intended for politicians and food manufacturers to correct factors affecting prices.
The food price index is a measure that shows the average price of food and why food prices go up or down. Five figures are averaged together to create the general price index; They are: cereals, sugar, oils and fats, meats and dairy products. In addition to showing the price of food, this index details exactly what factors are causing the price of food to go up or down. Normal factors include export and import prices, the amount of food produced, and natural disasters that affect production levels. While consumers can look at the Food Price Index to find out why food prices are changing, this scale is more about showing politicians and food manufacturers what’s affecting prices so factors can be corrected. if required.
Six figures are shown in the Food Price Index, but only five of them are actual measurements; the sixth averages the other five together. The cereal index does not measure the prices of packaged cereals, but rather the rice and wheat used to create cereals. Dairy measures refer to eggs, milk, and milk-based products, while the meat index tracks the broad spectrum of meat, including beef, pork, and poultry. Although called the oils and fats index, this measure only looks at the price of oils such as soybean oil, olive oil, and canola oil. In the sugar index, the price of sugar, regardless of its form, is measured and displayed.
In addition to showing differences in food prices for a given month, the index also details why prices are changing. Sometimes the reasons can be as simple as wheat selling poorly one month or a country lowering export prices and reducing shipping costs for that month. A natural disaster is another common reason, because one can eat up crop fields or kill many animals, lowering overall production. If food products are used for something else, such as biofuels, this can also affect prices.
While the Food Price Index chart is accessible to anyone, it is not entirely intended for consumers, because the chart only tells consumers if prices are going down or up and why. This chart is intended more for politicians and food manufacturers, as they have the power to change food prices by altering the factors that affect food prices. The Food Price Index can also show politicians which countries may have food riots, which can help them preemptively stop any riots.
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