The FRED Blog has discussed how changes in global commodity prices for coffee, tea, and cocoa have impacted the price of comfort drinks in the European Union. Today, we compare global and US consumer prices for sugar and discuss why they’re disconnected.

The FRED graph above shows three data series on sugar prices:

• The blue line is the domestic consumer price index for sugar and sweets. This is an index number, reported by the US Bureau of Labor Statistics, that measures the trend in the prices paid by US consumers.
• The red line is the world benchmark price for raw cane sugar ready to be shipped for export. The International Monetary Fund (IMF) uses data on sugar No. 11 futures contracts from Intercontinental Exchange (ICE) to report this price in US cents per pound. At the time of this writing, Brazil is the world’s largest exporter of raw cane sugar.
• The green line is the price of raw cane sugar for delivery at one of five designated US ports with refinery facilities. The IMF uses data on sugar No. 16 futures contracts from ICE to report this price in US cents per pound.

We customized the data to an index with a value of 100 in the first quarter of 1990, when the first IMF commodity price data are available, to better compare the changes in global commodity prices to the change in the US consumer price index. We can’t sugarcoat it: These indexes don’t tend to move in sync.

Between 1990 and 2009, the price of raw cane sugar delivered to US refineries was remarkably stable. During that period, consumer prices rose steadily while international prices bounced up and down. During the next several years, the US and the global prices for raw sugar moved in sync; but their spike in 2011 was not fully reflected in the domestic CPI in the US. Between 2020 and the time of this writing, the co-movement between rising raw sugar prices and rising consumer prices for sugar and sweets is more noticeable.

So, what’s the story behind the numbers?

This brochure about the ICE’s sugar futures contracts provides an overview of the international sugar market and the factors that hinder the free trade in this commodity. In short, the disconnect between international and domestic prices stems from subsidies to growers, import restrictions, and other regulations by producers and consumers organized in trade blocs.

Most recently, the US Department of Agriculture’s October 2023 “Sugar and Sweeteners Outlook” by Vidalina Abadam and David Marquardt describes how the exceptional drought conditions in the southern US are reducing the projected domestic sugar supply in 2023-2024. Trade partners are also experiencing droughts, and thus international commodity prices and domestic consumer prices are rising faster than in previous years.

How the graph was created: Search FRED for and select “Consumer Price Index for All Urban Consumers: Sugar and Sweets in U.S. City Average.” Next, click on the “Edit Graph” button and use the “Add Line” tab to search for and add “Global price of Sugar, No. 11, World.” Repeat the previous step to add “Global price of Sugar, No. 16, US.”

Suggested by Diego Mendez-Carbajo.

The FRED graph above shows the exchange rate of two currencies with the US dollar: the Swiss franc and the Colombian peso. We chose these two for their obvious contrasting history.

• The Swiss franc is considered to be among the strongest currencies—meaning that it tends to appreciate with respect to many other currencies.
• The Colombian peso is the opposite, with continuing depreciation with respect to strong currencies. (One peculiar benefit of using this currency is that it was never rebased—i.e., never had a few zeroes removed from its high face value. This numeric consistency avoids potential issues with displaying the peso’s exchange rate across various definitions of the currency.)

The graph shows that, over the longer run, the Swiss franc has become stronger than the dollar while the Colombian peso has gotten significantly weaker than the dollar. There are considerable variations at shorter horizons, which can be driven by many factors related to the expectations about the currencies’ respective economies. (This recent FRED Blog post covers this topic.) But back to the long-run changes…

The second graph takes the same exchange rates and adjusts them by the inflation rates in the US, Switzerland, and Colombia. These are so-called real exchange rates. Note how the lines are much flatter, especially as you compare the scale of the vertical axes in both graphs.

A large part of these long-run exchange rate movements can indeed be explained by inflation differentials: Inflation is typically low in Switzerland, while it is typically high in Colombia. The lines are not completely flat, though. First, the consumer price index or the GDP deflator may not be the appropriate price index to use here, as other factors such as taxes, tariffs, and other trade impediments may matter. Finally, most currency exchange is not performed to buy foreign goods, but rather for purely financial transactions. Thus, a currency can be more or less attractive depending on economic or political developments.

How these graphs were created: Search FRED for “Colombia exchange rate” and take the option with the longest time range. Click on “Edit Graph,” open the “Add Line” tab, and search similarly for “Switzerland exchange rate.” Open the “Format” tab and put the legend for the second line on the right. You have the first graph. For the second, take the first graph, click on “Edit Graph,” add series by searching for “US CPI,” then again for “Colombia CPI,” in both cases making sure the series is as long as possible and in levels, not growth rates. Apply formula a*b/c. Repeat for the second line and “Switzerland deflator” (the CPI series is too short).

Suggested by Christian Zimmermann.

The FRED Blog is proud to have reached the milestone of 900 blog posts. As with every centennial, we present a graph that’s related to the number. Although 900 was challenging, FRED always delivers.

Today’s topic is gasoline, and the data set comes from a survey of 900 retailers. The values reflect the average prices of “regular” gasoline, with octane levels of 85 to 88. The FRED graph above offers some not-so-surprising observations: Gas prices fluctuate dramatically, and gas prices have increased substantially since the 1990s, peaking in mid 2022.

Adjusting for consumer price inflation, as we do in our second graph, shows the same variability but reveals something new: After the increase in the early 2000s, the real gas price has not been trending up and the 2022 peak in the first graph is surpassed on several occasions. But, of course, what really matters is how gas prices relate to incomes, which we show in our third graph. There, we see that current gas prices (measured as the number of minutes of work it takes to purchase a gallon of gasoline) are not that much higher than in the 1990s.

How these graphs were created: The first graph can easily be found by searching FRED for “gasoline price.” For the second, click on “Edit Graph,” in the “Add Line” tab search for CPI, and then apply formula a/b*100. For the third, replace the CPI by the average hourly wage (selecting the series for non-supervisory workers, which goes back further than other series) and then apply formula a/b*60.

Suggested by Yvetta Fortova and Christian Zimmermann.