Commodity Prices

How It Works

Commodity prices are the starting point of the food price chain and are tracked on exchanges like the Chicago Mercantile Exchange (CME). Live cattle futures, for example, set the base price that eventually determines retail ground beef costs. In early 2024, live cattle futures traded around $175-185 per hundredweight, near all-time highs due to the smallest U.S. cattle herd since 1951. However, the relationship between commodity prices and retail prices is complex and delayed. When live cattle prices spike, it takes 3-6 months to fully flow through to retail ground beef. When wheat prices doubled after Russia's invasion of Ukraine in 2022, bread prices rose only about 15% because wheat represents just 5-8% of the retail price of bread — labor, packaging, and distribution dominate. The Cheeseburger Index reflects commodity price movements with these lags. Beef shows the strongest commodity-to-retail correlation (about 0.75), while bread and cheese show weaker correlations (0.3-0.5) because processing costs dominate their retail price. Understanding this lag explains why the Cheeseburger Index can continue rising even after commodity markets have peaked.

Related Terms

• Input Costs — The costs of raw materials, labor, energy, and other resources that go into producing a finished product — rising input costs are a primary driver of food price inflation.
• Food Supply Chain — The network of farms, processors, distributors, and retailers that moves food from production to the consumer's plate, typically spanning 1,500+ miles for the average American meal.
• Producer Price Index (PPI) — A BLS measure of the average change in selling prices received by domestic producers for their output — a leading indicator that signals future changes in consumer prices.