Food Prices Essay

Why Did world-wide nourishment scathes turn off? For the last 25 years spherical nourishment legal injurys have been falling, set by the ontogenyd productivity and output of the farm sector knowledge domainwide. In 2007, this came to an abrupt end as global food p sieves soargond. By phratry 2007, the cosmos price of wheat rose to over $400 a ton-the upliftedest ever interpreted and up from $200 a ton in whitethorn. The price of clavus (maize) surged to $175 a ton, many 60 part above its average for 2006. An index of food prices, adjusted for inflation, which The Economist snip has kept since 1845, hit its highest level ever in declination 2007. unrivaled explanation for rising food prices has been additiond take in. The outgrowthd engage has been dictated by greater food inlet in rapidly growing nations, most nonably mainland China and India. Rising consumption of meat, in particular, has driven up demand for grains it takes eight kilograms of cereals to p roduce one kilogram of beef, so as demand for meat mounts, consumption of grains by cattle surges. Farmers at once feed 200 to250 million much heaps of grain to their animals than they did 20 years ago, driving up grain prices. Then in that respect is the final turn up of bio- enkindle subsidies.Both the get together States and the europiuman Union have adopted policies to extend fruit of grain alcohol and bio-diesel in order to s low-down down global warming (both products argon argued to produce fewer C02 emissions, although exactly how effective they are at doing this is actively debated). In 2000, around 15 million tons of Ameri fucking Corn was off-key into ethanol in 2007 the figure reached 85 million tons. To promote increased outturn, governments have given subsidies to farmers. In the United States subsidies amount to betwixt $0. 29 and $0.36 per litre of ethanol. In Europe the subsidies are as high as $1 a litre. not surprisingly, the subsidies have created an incentive for farmers to plant more(prenominal) crops that can be turned into bio-fuels (primarily feed and soy sauce beans). This has diverted land away from production of corn and soy for food, and abbreviated the supply of land devoted to growing crops that come int receive bio-fuel subsidies, such as wheat. This highly subsidized semen of demand seems to be having a dramatic effect on demand for corn and soy beans.In 2007, fur example, the U. S.increase in demand for corn-based ethanol accounted for more than one-half of the global increase in demand for corn. What is complicating the lieu is that high tariffs are shutting out producers of alternative products that can be turned into bio fuels, most notably lettuce cane, from the U. S. and EU markets by high tariffs. Brazil, the worlds most efficient producer of sugar cane, confronts instant tariffs of at least 25 part by value in the United States and 50 pct in the European Union, raising the price of imported sugar cane and making it uncompetitive with subsidized com and soy beans.This is unfortunate beca give sugar cane is widely seen as a more environmentally friendly raw material for bio-fuels than either corn or soy. Sugar cane uses slight fertilizer than corn or soy and produces a higher yield per hectare in terms of its energy content. ethanol is also produced from what used to be considered a waste produce, the fibre outback(a) from the cane during processing. If form _or_ system of government makers have their way, however, the situation may get in time worse.Plans in both the United States and the European Union call for an increase in the production of bio-fuels, however neither political entity has agreed to number tariff barriers on sugar cane or to remove the business distorting subsidies given to those who produce corn and soy for bio-fuels. Brazil is not sit down on the sidelines in 2007 it asked the military personnel Trade brass instrument to probe U. S. subsidies to corn farmers for ethanol production. Supplementary Reading article-Rising global food prices threaten to increase poverty. 2 Rising Global nourishment charges Threaten to Increase exiguity by Kata Fustos.(April 2011) Global food prices have been rising, threatening to reach record levels in the coming months if authentic trends continue. Growing world demand ascribable to change magnitude world population and shifting consumption patterns, and lower supplies partly due to bad die hard raised the World cants food price index by 15 per centumage between October 2010 and January 2011. 1 The index increased by 29 percent overall between February 2010 and February 2011. In January, the pabulum Price Index of the United Nations food for thought and gardening Organization (FAO) was at its highest level since tracking began in 1990.2 While not all countries are affected equally, the recent volatility is particularly alarming in regions where plenty overleap more than ha lf of their income on food. Global forage Prices Surge to Record Levels, Hurting the despicable in emit- and Middle-Income Countries A combination of unfavorable weather patterns around the world and uncertainty in the quality of wheat products in China has affected the global food supply. Record heat and drought in 2010 in the former Soviet Union subtilely reduced wheat production and dealt a shock to global wheat supplies.Extreme dry weather in Brazila major food tradeercontributed greatly to general deficits of sugar, soybeans, and maize. Devastating rain and floods in Australia damaged wheat crops and reduced the yields of sugar harvests. Additionally, a severe drought in China threatens the harvest of the sylvans wheat crop and has prompted the FAO to issue a special alert, characterizing the present-day(prenominal) situation as potentially a serious problem. 3 For decades, China has relied mostly on its own interior(prenominal) grain production and was take from the global grain market.However, if the drought destroys a significant portion of the harvest and China has to import grain to fulfill home(prenominal)ated demand, the impact can shock the world market and provoke even sharper increases in global prices. As a government issue of Chinas acquire power, it can outbid others in the global market, and secure supplies for its own population. An expanding world population, greater reliance on crops as biofuels, and shifting diets continue to increase the collective demand for food, making the gap between supply and demand even wider.Since price volatility and growing demand are in all probability to persist, we need global action to ensure we do a interrupt job of nutriment the hungry before we face the future challenges of feeding the expected 9 billion people in the world in 2050, said Robert Zoellick, World Bank president. 4 fit in to the World Bank index, global sugar prices reached a 30-year high in the beginning of 2011, after increasing 12 percent since January 2010. Edible oil prices have travel 73 percent since June 2010. Among grains, the price of wheat has increased the most, more than two-bagger between June 2010 and January 2011.The price of maize has been affected by the surge in the wheat and oil markets and also jumped about 73 percent during the encourage half of 2010. Other food items that contribute to dietary diversity, such as vegetables and beans, have also experienced large price increases. Prices do not rise at the same enumerate in all countries domestic markets are affected based on how well governments are 3 able to shield their population from global price surges through the use of subsidies, import taxes, and increased domestic production.Figure 1 Change in World Commodity Prices, January 2010 to January 2011 Source World Bank, Commodity Price selective information (Pink Sheet), accessed at http//siteresources. worldbank. org/INTDAILYPROSPECTS/Resources/Pnk_0411. pdf, on April 1 , 2011. Although food prices had been increasing for seven consecutive months by February 2011, the price of all items had not grown at the same ill-use (see Figure 1).According to the World Banks Food Price Watch, this differentiates the current situation from the price surges of 2008, when food riots broke out crosswise the developing world. Meat prices have stayed relatively stable over the bygone year.Following good harvests in exporting countries, the global price of rice was actually lower at the end of 2010 than in the beginning of the year, and it remains 70 percent below its 2008 peak. Therefore, rice provides a more inexpensive alternative grain to the ugly and its accessibility has prevented more people from change posture into poverty and undernourishment. At the same time, some Asian economies have seen sharp increases in rice prices. In Vietnam, Bangladesh, and Indonesiaall high rice consumption countriesdomestic rice prices increased over 30 percent in the past year.5 Soaring food prices disproportionately hurt the poor in developing countries. This is especially true in regions where people spend a majority of their income on food and rely on a specific food product. Although some farmers and food producers are benefitting from greater profits, the acquit effect of higher prices is a rise in the number of the poor. The World Bank estimates that an additional 44 million people have locomote into poverty in the developing world as a result of higher food prices. Overall, the number of chronically hungry people began to wage increase again after a brief decrease to 925 million in 2010 (see Figure 2).According 4 to Zoellick, the trends towards the 1 billion are worrisome. Global food prices are rising to dangerous levels and threaten tens of millions of poor people around the world. 6 Figure 2 Distribution of Undernourished raft in the World in 2010 (in Millions) Source FAO Statistics Division, accessed at www. fao. org/economic/ess/en/, on April 7, 2011. India Especially Affected by High Prices Food prices are rising faster in India than in other large economies. As the countrys population continues to grow and middle class incomes rise, there is increasing pressure on the government to provide food for the inviolate country.Despite rapid economic growth over the past decade, India hush up struggles to feed its population According to the 2005/2006 National Family Health Survey, 40 percent of children below the age of 3 were underweight and 45 percent were stunted. 7 Lack of investment has kept domestic agricultural productivity low as manual labor remains the dominant source of domestic food production. In 2008/2009, agriculture employed about 52 percent of the labor force, but merely made up 13 percent of Indias GDP. 8 Farming and agriculture remain greatly incompetent and inadequate for feeding the countrys 1.2 billion people. Low production and an unusually wet summer in 2010 contributed to the current dome stic food inflation that reached a 16 percent annual rate in January 2011. This composite figure masks the rise in the price of some staples, such as onion and garlic, which rose by 71 percent during the past year. The sharp increase is most alarming for the 41 percent of the population in India who live on $1. 25 or less a day and spend a majority of their income on food, as even basic items are becoming unaffordable.9 The government is responding to the current crisis by providing heavy subsidies for agricultural production and by importing increasing amounts of some staples, such as lentils and beans, to ensure their availability. It has also put export restrictions on certain products to keep them for domestic consumption. 10 These policies can only provide temporary solutions, however Long-term investment is required in agricultural research to improve the quality of seeds, irrigation techniques, and modernize other production components. 115.References 1. World Bank, Food Pric e Watch (February 2011), accessed at www.worldbank. org/foodcrisis/food_price_watch_report_feb2011. html, on Feb. 17, 2011. 2. Food and Agriculture Organization of the United Nations (FAO), Global Food Price supervise (Feb. 3, 2011), accessed at www. fao. org/giews/english/gfpm/GFPM_02_2011. pdf, on Feb. 16, 2011. 3. FAO Global Information and Early model System on Food and Agriculture, Special Alert A stark(a) Winter Drought in the North China Plain May Put Wheat Production at Risk (Feb. 8, 2011). 4. World Bank, Food Security Fears Rise Along With Prices (April 2011), accessed at http//go. worldbank. org/VCXQZNWRA0, on April 7, 2011. 5.World Bank, Food Price Watch and FAO, Global Food Price Monitor. 6. Food Price Hike Drives 44 Million People into pauperisation, World Bank get Release No 2011/333/PREM (Feb. 15, 2011), accessed at http//go. worldbank. org/OFGV8BZN20, on Feb. 17, 2011. 7. National Family Heath Survey, underlying Indicators for India (2005-06), accessed at www. nfhsindia. org/pdf/India. pdf, on Feb. 16, 2011. 8. Ministry of Finance, Government of India, Economic Survey 2010-11 (February 2011). 9. UNDP, Multidimensional Poverty Index, accessed at http//hdr. undp. org/en/media/HDR_2010_EN_Table5_reprint. pdf, on Feb. 17, 2011. 10.Corey Flintoff, Food Price Surge Puts gunstock on Indias Poor, NPR (Jan. 6, 2011). 11. Renuka Mahadevan, Productivity Growth in Indian Agriculture The Role of Globalization and Economic Reform Asia-Pacific Development Journal, Vol. 10, No. 2, December 2003. Case Discussion Questions 1. Who benefits from government policies to (a) promote production of ethanol and (b) get tariff barriers on imports of sugar cane? Who suffers as a result of these policies? 2. One estimate suggests that if food prices rise by one-third, they will reduce living standards in loaded countries by about 3 percent, but in very poor ones by about 20 percent.According to the International Food Policy Research Institute, unless policies cha nge, cereal prices will rise by 10 to 20 percent by 2015 , and the expansion of bio fuel production could reduce calorie intake by 2 to 8 percent by 2020 in many of the world s poorest nations. Should rich countries do anything about this potential problem? If so, what? 3. How might a polity of free trade in the United States and European Union cause food prices to drop? Should the United States eliminate the subsidies it pays to corn farmers?How might a free trade policy facilitate the efforts of the United Nations World Food Programme? 4. Consider the social implications of trade policy that is pro-producer. Is such a policy ethical when considered from the perspective of non-producers? What are the drawbacks of following a policy designed to protect the interests of certain groups within a country? 5. Protectionism in agriculture has been a central issue for the World Trade Organization in recent years. Given the current implications of the rising costs of food for the worlds po or, should the World Trade Organization do more?