The Rising Price of Food
The Rising Price of Food
Recent years have seen dramatic increases in the world prices for food commodities. The first half of the year 2008 saw the price of rice go up by 50% and generally speaking, similar increases in other food commodities such as maize, soybeans and wheat have been seen across the world, resulting in various forms of panic. In the Philippines, farmers have begun hoarding supplies of rice, while Indonesians have initiated strikes due to soybean shortages.
Generally speaking, these food crises have been attributed to the supply and demand factors resulting from meteorological catastrophes, shortages resulting from poor harvests and swelling populations. (BBC 2008; Lewis 2008) Steinberg (2008) reports that from early 2006 to early 2008, the world prices for corn has risen by 125%, rice by 217%, soybeans by 107% and wheat by 136%.
Feilden (2008) opines that while foodstuffs have never been cheap to the point of absurdity, the past thirty years have seen a long period of stability that was bound to end following an expanding middle class emerging from rapidly developing nations such as China and India. Feilden asserts that for the most part, the cost of wheat, corn and soya has fallen in real terms, but continuingly volatile climatological conditions, a diversion of agriculture towards the production of biofuel feedstocks and increasingly luxuriant middle class appetites have made this inevitable.
Parry, et al (66) have found that based on projections based on the Special Report on Emission Scenarios (SRES) made by the Intergovernmental Panel on Climate Change (IPCC) that when population growth and rising levels of carbon emissions are combined they create anthropogenic climate change effects that have a detrimental effect on food production. Simply put, they have a negative effect on simulated crop yields, with greater disparities existing between developed and developing countries.
Fortunately, these disparities are such that the shortfalls of developing nations are compensated for by the yields of developed nations which derive a limited benefit from climate change. What is problematic is that because of the complex nature of a globalized food supply, there is little to guarantee that these shortfalls in developing nations will be addressed through distribution. Another problematic causal factor driving the food crisis is the increased demand for value-added food commodities resulting from populations that have improved in class standing.
For example, prospering Asian peoples have begun to substitute more basic food commodities with input-intensive or highly processed foods, most notably in their consumption of beef. For every kilogram of beef consumed, a great proportion of grain is used for feed. Other examples of value-added commodities include processed foods that utilize corn oil and high fructose corn syrup. (FAO 4) Richard Manning (35-37) opines that grain-based diets are generally diets for the poor. Thus, as nations prosper, the global food supply is stretched to its limit to accommodate a middle class that is increasing to levels it was never designed to anticipate.
Following this chain of thought, recent price increases have come from increased use of food inputs rather than an absolute increase in food consumption. However, as suggested, the expanding middle class plays only a fractional role in the food price crisis. It does not mean that the global South is ultimately getting better. For the more than 2. 5 billion people who live on less than two dollars a day, the rise in food prices is a life or death matter, and as such, many from the world’s underclasses are turning towards cheaper food commodities as substitutes for increasingly costly equivalents.
Faiola (2008) reports that in Mauritania, some have turned towards consuming sorghum in place of bread, whilst others have begun Indians have replaced soybean oil with groundnut oil. In the Philippines, the local Food and Nutrition Research Institute has proposed replacing some of the flour used in producing the staple known as pan de sal with squash puree instead to allow bakeries to keep the price down. The rise in food prices have also been affected by recent developments in global energy. Heinberg (2007) observes that the yields of industrial agriculture are highly dependent on fossil fuel inputs.
While innovations such as crop rotation and the usage of manure and compost help reduce instances of famine, it is the use of fossil fuels in the production of fertilizers, pesticides, herbicides and tractor-powered tillage that permits existing levels of production. In this context, it comes as no surprise then that as oil prices increase, so too does the price of food. Further amplifying the effects of oil price increases, is the diversion of agriculture towards providing for the booming biofuel industry.
In a cover story for TIME Magazine, Michael Grunwald (28-33) observes that the diversion of grain-based agriculture from the food supply and towards the production of fuel means that biofuels like ethanol are imposing dramatic impacts upon the costs of maintaining food supply for both the world’s hungry and the world’s well fed, noting that “the grain it takes to fill an SUV tank could feed a person for a year. ” Barrionuevo (2008) notes that while “ethanol has raised the incomes of farmers” and “given new hope to flagging rural economies” it is a major impact on the cost of food.
The demand for biofuel cannibalizes the existing food supply, increasing the collective demand for grain. Steinberg notes that what also compounds these very real long-term factors is the role which commodity speculation plays in shoring up food prices. He attributes the food price crisis to an onslaught of investment speculation comparable to the subprime crisis which drove up house prices earlier this decade. Quoting the British publication The New Stateman, Steinberg notes that hedge fund groups have thrown billions of dollars into commodities instead.
But rather than going into gold and oil, they have gone into cattle, cocoa and corn as ‘soft commodities. ’ Excessive investment drives up food prices, which encourages hoarding. Because a crisis of food supply guarantees a return on these investments, a vicious commodity super-cycle ensues. REFERENCES Lewis, L 2008, ‘Fear of rice riots as surge in demand hits nations across the Far East,’ The Times Online, 8 April. Available from: <http://business. timesonline. co. uk/tol/business/industry_sectors/consumer_goods/article3701347.
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