Food Prices Essay

Why Did world-wide nutrient legal injurys Rise? For the last 25 years worldwide diet worths rescue been f anying, driven by the increased productivity and step forwardput of the farm sector worldwide. In 2007, this came to an abrupt end as global victuals prices soared. By September 2007, the world price of wheat berry rose to over $400 a short ton-the risqueest ever recorded and up from $200 a ton in May. The price of corn (maize) surged to $175 a ton, some 60 percent above its aver be on out for 2006. An magnate of nutriment prices, adjusted for inflation, which The Economist magazine has kept since 1845, hit its highest level ever in December 2007.One explanation for procession food prices has been increased demand. The increased demand has been driven by greater food consumption in rapidly exploitation nations, most notably mainland China and India. locomote consumption of meat, in particular, has driven up demand for g come downs it takes eight kilograms of cer eals to produce one kilogram of beef, so as demand for meat rises, consumption of grains by cattle surges. Farmers now feed 200 to250 one thousand thousand more than tons of grain to their animals than they did 20 years ago, driving up grain prices. Then in that location is the issue of bio-fuel subsidies.Both the get together States and the atomic number 63an sum total put up adopted policies to increase work of fermentation alcohol and bio-diesel in order to slow down global warming (both products are argued to produce fewer C02 emissions, although precisely how consequenceive they are at doing this is actively debated). In 2000, around 15 million tons of American Corn was turned into ethanol in 2007 the figure reached 85 million tons. To campaign increased production, governments wipe out given subsidies to farmers. In the United States subsidies amount to amid $0. 29 and $0.36 per litre of ethanol. In Europe the subsidies are as high as $1 a litre. Not surprisingly, the subsidies contrive created an incentive for farmers to whole shebang more crops that can be turned into bio-fuels (primarily corn and soy beans). This has diverted land away from production of corn and soy for food, and reduced the supply of land devoted to growing crops that dont sustain bio-fuel subsidies, such as wheat. This highly subsidized source 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 half of the global increase in demand for corn. What is complicating the event is that high tariffs are shutting out producers of alternative products that can be turned into bio fuels, most notably abrasion cane, from the U. S. and EU marketplaces by high tariffs. Brazil, the worlds most efficient producer of sugar cane, confronts import tariffs of at least 25 percent by value in the United States and 50 percent in the European Union, fostering the price of imported sugar cane and making it uncompetitive with subsidized com and soy beans.This is unfortunate because sugar cane is widely seen as a more environmentally friendly raw material for bio-fuels than either corn or soy. Sugar cane uses less 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 arrive atd from the cane during processing. If policy makers have their way, however, the situation may get horizontal worse.Plans in both the United States and the European Union call for an increase in the production of bio-fuels, only if neither political entity has agreed to reduce tariff barriers on sugar cane or to remove the trade distorting subsidies given to those who produce corn and soy for bio-fuels. Brazil is not sitting on the sidelines in 2007 it asked the humankind Trade musical arrangement to probe U. S. subsidies to corn farmers f or ethanol production. Supplementary Reading article-Rising global food prices scupper to increase poverty. 2 Rising Global forage legal injurys Threaten to Increase Poverty by Kata Fustos.(April 2011) Global food prices have been rising, threatening to reach record levels in the coming months if current trends continue. outgrowth world demand due to change magnitude world population and shifting consumption patterns, and lower supplies partly due to bad weather raised the World asserts food price index by 15 percent between October 2010 and January 2011. 1 The index increased by 29 percent overall between February 2010 and February 2011. In January, the feed Price Index of the United Nations Food and Agriculture Organization (FAO) was at its highest level since tracking began in 1990.2 While not all countries are change equally, the recent volatility is particularly scare in regions where tidy sum spend more than half of their income on food. Global Food Prices Surge to Record Levels, Hurting the Poor in Low- and Middle-Income Countries A combination of hostile weather patterns around the world and uncertainty in the quality of wheat harvest homes in China has touched the global food supply. Record heat and drought in 2010 in the former Soviet Union sharply reduced wheat production and dealt a shock to global wheat supplies.Extreme change weather in Brazila major food exportercontributed greatly to worldwide 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 countrys wheat crop and has prompted the FAO to issue a special alert, characterizing the current situation as potentially a serious problem. 3 For decades, China has relied mostly on its own home(prenominal) grain production and was absent from the global grain market.However, if the drought destroys a significant portion of the ha rvest and China has to import grain to fulfill domestic demand, the impact can shock the world market and cause even sharper increases in global prices. As a will of Chinas buying power, it can outbid others in the global market, and secure supplies for its own population. An expanding world population, greater faith 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 likely to persist, we expect global action to ensure we do a better job of feeding the hungry sooner we face the future challenges of feeding the expected 9 billion people in the world in 2050, said Robert Zoellick, World Bank president. 4 jibe 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 risen 73 percent since June 2010. Among grains, the price of wheat has increased the most, more than doubling 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 second 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 appraise 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 Data (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 pace (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 across the develop world. Meat prices have stayed relatively stable over the gone year.Following good harvests in export countries, the global price of rice was actually lower at the end of 2010 than in the beginning of the year, and it ashes 70 percent below its 2008 peak. Therefore, rice provides a more affordable alternative grain to the pitiable and its accessibility has prevented more people from sinking 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 net effect of higher prices is a rise in the number of the poor. The World Bank estimates that an additional 44 million people have fallen into poverty in the developing world as a result of higher food prices. Overall, the number of chronically hungry people began to climb 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 People 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 entire country.Despite rapid economic growth over the past decade, India still 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 rude 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 only do up 13 percent of Indias GDP. 8 Farming and agriculture remain greatly uneffective and inadequate for feeding the countrys 1.2 billion people. Low production and an unusually ladened summer in 2010 contributed to the current domestic food inflation that reached a 16 percent yearly 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 ye ar. 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 fair 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 spare them for domestic consumption. 10 These policies can only provide temporary solutions, however Long-term investment is unavoidable in agricultural research to improve the quality of seeds, irrigation techniques, and modernize other production components. 115.References 1. World Bank, Food Price 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 Monitor (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 Warning musical arrangement on Food and Agriculture, Special Alert A Severe Winter Drought in the conjugation 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 Poverty, World Bank Press Release No 2011/333/PREM (Feb. 15, 2011), accessed at http//go. worldbank. org/OFGV8BZN20, on Feb. 17, 2011. 7. National Family Heath Survey, Key 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 Strain on Indias Poor, NPR (Jan. 6, 2011). 11. Renuka Mahadevan, Productivity Growth in Indian Agriculture The aim 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) place 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 luxuriant countries by about 3 percent, but in very poor ones by about 20 percent.According to the International Food Policy Research Institute, unless policies change, 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 policy 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 societal 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 poor, should the World Trade Organization do more?