Farm Price Index - Explained
What is the Farm Price Index?
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What is the Farm Price Index (FPI)?
The Farm Price Index (FPI), or Agricultural Price Index, is a monthly index that monitors the prices of various crops and livestock received by farmers. The U.S. Department of Agriculture (USDA) releases the index to monitor price movements of agricultural products (crops and livestock). The Farm Price Index is released between the 23rd - 25th of every month. It is a leading indicator for the consumer price index and producer price index. The Index released is as a result of monthly price monitoring done by the National Agricultural Statistics Service (NASS).
How is the Farm Price Index (FPI) Used?
The Farm Price Index (FPI) is sometimes called the Agricultural Price Index (API). It is an important metric for measuring inflation or deflation in an economy. There are several types of economic indicators that measure inflation or deflation and predict the economic direction of a country. There are three broad categories of economic indicators, the leading indicator, the lagging indicator, and the coincident indicator. As a lagging economic indicator, FPI is important for economic predictions or forecasting. A particular economic trend, whether positive or negative causes changes in the FPI. The prices of livestock and crops also have an impact on the overall economy, which is why the study of price movements and the release of FPI are important. Investors, economists, policymakers, and analysts use FPI, alongside other indexes such as CPI and PPI to evaluate how well an economy is faring and give the direction of inflation or deflation in a country. The Consumer Price Index: This is similar to the FPI, it measures and monitors changes in the prices paid for a basket of consumer goods and services by consumers. There are eight goods and services that represent the basket of consumer goods and services. CPI is measured monthly and the index is released by the U.S.Bureau of Labor Statistics. The Producer Price Index: PPI is an index that tracks changes in prices paid to producers over a given period, often a month. This index is released monthly and reports the prices received by all industries that produce goods domestically in the US.
Who Produces the Farm Price Index
Primarily, the USDA releases the Farm Price Index after thorough research and reports on price issues in food industries and the agricultural sector at large. There are two divisions in the USDA that help with the production of the farm price index, these are the Economic Research Service (ERS) and the National Agricultural Statistics Service (NASS). While NASS conducts monthly surveys and prepares FPI data for the USDA, ERS provides information on agriculture, food, and natural resources to the public and private sectors.
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