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Rising Food Prices Foreshadow Global Shortages
by
findingDulcinea Staff
In response to the increasing expense of staple foodstuffs, developing countries resort to price restrictions and import regulations. As oil prices rise, can modern farming practices be sustained?
30-Second Summary
Adverse weather conditions and crop diseases have pushed up the cost of essential edibles, such as meat, grains, eggs and vegetable oils, in many parts of the world.
However, analysts have pointed to the rising price of oil as the chief problem. More expensive fuel translates into steeper shipping rates, costlier hydrocarbon-based products (such as fertilizers and pesticides) and higher prices for food processing.
In addition, American corn farmers are allotting a greater proportion of their crop to ethanol production. Although this alleviates domestic oil prices somewhat, it pushes up the cost of corn, a staple in the diets of nations the world over.
“Booming ethanol production has already raised U.S. food prices by $47 per person annually,” Popular Science magazine reports.
Sharp increases in corn prices sparked riots in Mexico in January, and food costs in Western Europe increased 6 percent over 2006–07, outpacing inflation.
Developing economies stand to lose most. These countries rely on imports to sustain themselves, and on average their citizens spend a larger percentage of their wages on food than do their counterparts in developed nations.
“China has already seen a 20 percent price increase over the past 12 months for some staple goods, and in India, the overall food price index has gone up 10 percent from the past year,” writes London-based daily newspaper The Independent.
Jacques Diouf, director-general of the U.N. Food and Agriculture Organization sees dark times ahead for struggling economies, according to the Financial Times. In October this year, Diouf said, “If prices continue to rise, I would not be surprised if we began to see food riots.”
However, analysts have pointed to the rising price of oil as the chief problem. More expensive fuel translates into steeper shipping rates, costlier hydrocarbon-based products (such as fertilizers and pesticides) and higher prices for food processing.
In addition, American corn farmers are allotting a greater proportion of their crop to ethanol production. Although this alleviates domestic oil prices somewhat, it pushes up the cost of corn, a staple in the diets of nations the world over.
“Booming ethanol production has already raised U.S. food prices by $47 per person annually,” Popular Science magazine reports.
Sharp increases in corn prices sparked riots in Mexico in January, and food costs in Western Europe increased 6 percent over 2006–07, outpacing inflation.
Developing economies stand to lose most. These countries rely on imports to sustain themselves, and on average their citizens spend a larger percentage of their wages on food than do their counterparts in developed nations.
“China has already seen a 20 percent price increase over the past 12 months for some staple goods, and in India, the overall food price index has gone up 10 percent from the past year,” writes London-based daily newspaper The Independent.
Jacques Diouf, director-general of the U.N. Food and Agriculture Organization sees dark times ahead for struggling economies, according to the Financial Times. In October this year, Diouf said, “If prices continue to rise, I would not be surprised if we began to see food riots.”
Headline: Global food production falls short
Rising food prices could force developing nations to follow in the footsteps of Russia, which on Oct. 15 instituted caps on prices for staple goods such as milk, eggs, vegetable oil and bread, effective through the end of 2007. Morocco recently eliminated tariffs on imported wheat, and Egypt has increased food subsidies. “If prices continue to rise, I would not be surprised if we began to see food riots,” said Jacques Diouf, director-general of the U.N. Food and Agriculture Organization. Crops allocated for more profitable biofuels, frequent droughts and flooding and a growing global population have all pushed up the cost of food. Wheat and milk reached record high prices in futures trading this summer.
Source: Financial Times (registration required)
Russia is resorting to Soviet-style cost controls on common food items to rein in prices, perhaps in a bid to preserve President Vladimir Putin’s popularity. “We were told in no uncertain terms that we have to freeze prices on certain products,” one Russian food industry executive said. “Everybody understands what the government is doing. It is part of their election campaign.” The cost of vegetable oil went up 13.5 percent in September. Butter prices were up 9.4 percent and milk up 7.2 percent the same month due to worldwide price increases for agricultural commodities.
Source: MSNBC
In January 2007, three months of price rises for corn in Mexico culminated in riots. The cost of imports of corn from once cheap American supplies was up some 400 percent, rendering a staple Mexican food item unaffordable. President Felipe Calderon, an advocate of free-market economics, eventually capped corn flour prices at 78 cents per kilogram, but made this price optional for businesses. Analysts believe that this may be a harbinger of worse things to come. “Recently there's been a huge increase in the demand for industrial corn for the production of ethanol, which inevitably pushes up the price of foodstuffs," said Dawn McLaren, a research economist at the W.P. Carey School of Business in Phoenix. "But if we get a particularly bad harvest or if a weather system like El Nino strikes, we could be really stuck."
Source: The Independent
For the first time since the early 1970s, developed nations are feeling the pinch of a shortage of inexpensive food. “The whole global picture is flagging up signals that we’re moving out of a period of abundant food supply into a period in which food is going to be in much shorter supply,” said Henry Fell, chairman of Britain’s Commercial Farmers Group. The U.N. Food and Agricultural Organization (FAO) estimates that greater demand for meat from emerging-market economies such as China and India and a higher proportion of grain crops being allocated to biofuels will cause global food prices to rise between 20 and 50 percent over the next decade from their last 10-year average. According to the FAO, lower-income countries that do not produce enough food to meet their needs will spend more than $28 billion on importing cereals through October 2008, more than double what they paid in 2002.
Source: Financial Times (free registration required)
Opinion & Analysis: Are we facing the end of cheap food?
Daniel Howden, columnist for U.K. daily The Independent, writes that the price of corn, which doubled from June 2006 to June 2007, creates a domino effect with regard to the prices of numerous other consumer goods, such as dairy products, meat and eggs. He puts the blame for this trend on ethanol production in the United States. “Thirty percent of next year's grain harvest in the U.S. will go straight to an ethanol distillery,” Howden writes. “As the U.S. supplies more than two-thirds of the world's grain imports, this unprecedented move will affect food prices everywhere. In Europe farmers are switching en masse to fuel crops to meet the EU requirement that biofuels account for 20 percent of the energy mix.” He also writes that since funding for international food aid tends to be fixed, the doubling of food prices would halve food supplies for the poor.
Source: The Independent UK
According to Energy Bulletin, an online newsmagazine that compiles articles that support the “peak oil” theory, the price of foods is directly correlated with the price of oil. Transport costs, pesticides, food processing agents and the delivery of packaging all play into the final price of foodstuffs. “One study has estimated that U.K. imports of food products and animal feed involved transport used 1.6 billion liters for shipping, resulting in 4.1 million tons of carbon dioxide emissions.”
Source: EnergyBulletin.net
Urbanization and industrial farming have reduced the productivity of agricultural land by 16 percent since the advent of industrialized farming methods in the 1950s. This has been most noticeable in Africa and Central America, according to an article written for the PBS series “Earth on Edge.” The trade-off for better productivity would be more agricultural runoff into freshwater supplies, which are already dwindling.
Source: PBS.org
Ethanol creates a catch-22 in the American consumer goods market. When oil prices rise, the grain-based fuel can be a substitute to alleviate the pinch at the pump. Yet ethanol production cuts away from the amount of corn allotted to food and livestock rearing, pushing up the price of food. “A recent study conducted by the Center for Agricultural and Rural Development at Iowa State University (which receives funding from grocery manufacturers and livestock producers) reported that U.S. ethanol production could consume more than half of U.S. corn, wheat and coarse grains by 2012, driving up food prices and causing shortages. The study estimates that booming ethanol production has already raised U.S. food prices by $47 per person annually,” Dawn Stover writes. Planting more corn would take cropland away from other common commodities such as wheat and soybeans. The key solution to both the biofuel and the food questions would be to develop ethanol from cellulose rather than from starches and sugars, yet this is not expected to become feasible from a cost perspective until scientists develop enzymes that can break down the types of plant fibers found in woody plants.
Source: Popular Science
Reference Material: The outlook on food security
The U.N. Food and Agriculture Organization, which according to its Web site “leads international efforts to fight hunger,” has a collection of research papers and articles on the future of world food supplies.
Source: U.N. Food and Agriculture Organization
The U.S. Agency for International Development (USAID), a U.S. governmental aid organization, has a list of possible solutions to problems of world food security, as well as links to fact sheets on a range of topics including land management and irrigation.
Source: U.S. Agency for International Development
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