Nominal vs. Real Prices: What the Inflation Adjustment Shows
Published · 2 min read
A price chart that runs back to 1960 mixes dollars of very different value. The nominal price is the number as it was quoted at the time; the real price converts it into the purchasing power of one reference date - on this site, the most recent month. Only real prices answer the question most people are really asking: has this become more expensive?
How the conversion works
The calculation is simple: real price = nominal price × (price index today ÷ price index then). This site uses the US consumer price index for all urban consumers (CPI-U), because most world benchmark prices are quoted in US dollars. Between January 1960 and August 2026 that index rose about elevenfold, so a dollar in 1960 bought roughly as much as eleven dollars today. On any chart, the setting "Inflation-adjusted (real)" applies this to every point.
What it reveals: grain got cheaper, not dearer
In nominal terms, wheat looks like it became five times as expensive: World Bank prices averaged about 62 dollars per tonne in the 1960s and about 304 dollars so far in the 2020s. In August 2026 dollars, the same averages are about 654 and 345 dollars - in real terms wheat has become roughly half as expensive. Corn tells the same story, from about 540 to about 260 real dollars. Higher yields, better varieties, mechanization and fertilizer let farm output grow faster than demand for decades. The same adjustment also puts price spikes in perspective: the 1974 wheat peak of 220 dollars equals about 1,565 dollars today, far above the nominal record of 2022.
What real prices cannot tell you
The adjustment uses general US consumer inflation, not the costs of any particular farm or country. A farmer's own costs - fertilizer, fuel, land, labor - can rise faster or slower than the CPI, so a flat real grain price can still mean a squeeze on margins. When you view a price in euros or another currency, the site still deflates with US inflation; for purchasing power in the euro area you would need a euro-area index such as the HICP. And over a few months, inflation hardly changes anything: real prices are a tool for comparing decades, not weeks.
Current prices for this topic
Frequently Asked Questions
- Why do old prices look so much higher in real terms?
- Because the dollar has lost most of its purchasing power since then: in 1960 one dollar bought roughly what eleven dollars buy today. Converting old prices into today’s money multiplies them accordingly.
- Which inflation index does this site use?
- The US consumer price index for all urban consumers (CPI-U), not seasonally adjusted, published by the US Bureau of Labor Statistics. It is applied the same way whatever currency a price is displayed in.
- Should I use real prices to decide whether today’s price is high?
- For long-term comparisons, yes. For a farm’s profitability, compare the crop price with that farm’s actual input costs as well - they do not follow consumer inflation one to one.