The Price of Food

Ultimately, the world economy is supposed to have prices within its markets that reflect supply and demand on some level. Unfortunately, there are also a number of other factors at work as well as effects on supply and demand when it has come to food prices over the past year. Why are Food Prices So High?, by Steve Odland, Rising Temperature Raising Food Prices, by Lester Brown, and In a World Hungry for Biofuels, Food Security Must Come First, by Olivier De Schutter provide some insight as to the causes that are currently pushing food prices so high.

The larger the global economy has gotten the more interconnected and dependent prices have been on the entire world situation rather than anything that actually happens within a single countries boarder. Supply and demand are fluctuating at least partly because of events abroad. Fast growing populations like those recently seen in China and India have increased demand as expected, but weather has also been a factor in this year’s rising prices (Odland, 2012). This year has been marked by record high temperatures that have hurt crops all over the world (Brown, 2012). Seafood prices are up 6 percent because of the recent tsunami in japan and crop damage in South America, Australia, and Russia are all driving up vegetable prices by 50 percent (Odland, 2012). Oil prices also have a huge impact on food prices in general. Petroleum based fertilizers, plastic packaging with its plastic labels and ink, and produce transportation costs are all affected by the rising price of oil (Odland, 2012). As oil prices rise and severe weather events increase, food prices will be directly affected in the years to come. The removal of some pesticides is also thought to be decreasing crop yield in favor of quality (Odland, 2012). This stress on the overall supply and demand will continue to fluctuate as it always has and much of what occurs will be impossible to prevent.

There are a number of other factors outside the market’s control as well. Subsidized biofuels, like ethanol, are driving up food costs whenever efforts require food stocks as a source of fuel (Odland, 2012). According to a general consensus that has steadily been gaining purchase abroad, Olivier De Schutter says that “the latest calculations show that US ethanol policies have increased the food bills of poor food-importing countries by more than 9 billion dollars since 2006” (2012). The US is also effecting global prices because it is reducing the food supply by paying farmers not to plant to save water (Odland, 2012). Cropland is growing scarcer as a quarter of the globe’s land has already been sufficiently degraded (De Schutter, 2012). Supply and Demand is highly distorted by import tariffs and export taxes imposed by countries around the world. Interestingly enough, certain commodities are also driving up the prices of other goods, as is the case with soy and corn effecting egg prices in china being sold to the US (Odland, 2012). With these general trends it is easy to imagine food prices raising an increasing amount in the years to come.

 In the United States it has been a bad year for the food market for a number of reasons. According to Steve Odland, “The USDA sees food prices rising 2.5-3.5 percent in 2012 but many believe that inflation could be much higher” (2012). Food prices were directly affected in the U.S. by the United States Department of Agriculture’s overestimate of the corn harvest, which was projected to yield a record 376 million tons (Brown, 2012). Over estimates indicate that prices will decrease because of the excess of supply when in reality supply is much lower this year than originally foretold. This was not helped by the most extensive drought the United States has had in half a century leaving 63 percent of the nation without enough natural rain fall (Brown, 2012). In the future, Americans can count on this being a trend associated with global increases in temperature. Global warming is now considered to be a serious problem to future food security over the long run as identified by the 2012 Ecosummit (Brown, 2012). A few manufacturers have also manage to distort true prices in the United States by holding off on price increases in hopes that the prices would decrease again before it becomes an issue (Odland, 2012). In order to get prices down a number of changes are needed, many of which are beyond human control.

The world has some touch times ahead if this general food price trend continues. In order to make a real difference, the entire world will have to address global warming and even then it is impossible to undo some of what has already been done. There is no controlling natural disaster, put it may be possible to reduce human impact on the earth. Unfortunately, this is a problem of such epic proportions that short of directly addressing population growth, it is doubtful real progress could be made. Price increases in food and other commodities directly affected by these trends will make the purchase of other goods harder in many people’s daily lives. Supply and demand has to be accurately reflected in price with externalities included. If any progress is to be made on any of these issues it will require a global effort on a scale never seen before.

References

Brown, L. (2012, September 4). Rising Temperature Raising Food Prices. Huffington Post. Retrieved from http://www.huffingtonpost.com/lester-brown/rising-temperature-food-prices_b_1856186.html

De Schutter, O. (2012). In a World Hungry for Biofuels, Food Security Must Come First. Common Dreams. Retrieved October 28, 2012, from http://www.commondreams.org/view/2012/10/17-12

Odland, S. (2012). Why Are Food Prices So High? - Forbes. Forbes. Retrieved October 28, 2012, from http://www.forbes.com/sites/steveodland/2012/03/15/why-are-food-prices-so-high/