Rising Food Prices Having World-Wide Consequences

World prices for food are skyrocketing — and the coming fight over food supplies "will be between the industrialized world and the developing world."

Share This:

shelfPhoto: Christopher Berry

It's finally dawned on Americans — on the world, really — that there's no more cheap lunch. Or dinner or breakfast.

"For years, cheap food and feed were taken for granted in the United States," New York Times reporter Andrew Martin wrote Wednesday morning . "But now the price of some foods is rising sharply, and from the corridors of Washington to the aisles of neighborhood supermarkets, a blame alert is under way."

Food prices in the U.S. have risen more in 2007 than in any year since 1990. The rise in food prices, however, is a global phenomenon.

The Wall Street Journal reports that the price for rice has reached its highest level in two decades. World wheat prices have shot up more than 50 percent in 2007. Beer makers know the cost of barley malt has gone up 88 percent this year alone.

crop pricesGraphic: New York Times

 

These trends are likely to continue. "The sharp rise in food prices seen in 2007 is expected to be followed by another higher-than-normal jump next year, the USDA said Monday," the Dallas Morning New reported Wednesday . "And 2008's punch will be to the bread basket. Items made with wheat (breads and crackers) and soybean oil (cooking oil and fried foods) are expected to rise so much next year that they'll boost the cost of cooking at home by up to 4.5 percent ““ half a percentage point more than predicted just a month ago."

Using grain crops for biofuels is being blamed for much of the run-up in prices, especially by industries that compete for corn and soybeans. Even as the Senate voted 86 to 8 for a new energy bill last week that expands mandates for ethanol use, a lobbyist for the Grocery Manufacturers Association described the competition for land between food and fuel to be a "runaway freight train. It's great news for corn farmers, but terrible news for consumers."

foodGraphic: New York Times

For example, Sara Lee Corp has raised prices three times (a total of 15 percent) in the last year, according to the Morning News. Eggs alone were up 28 percent in the last year (although they are expected to drop in '08).

Focusing on biofuels misses the enormity of what's happening in the world's food supply.

The Economist magazine wrote last week that food was "cheap no more" largely because as the world grew richer, people ate more meat. The demand for grain-fed meat has driven up the price of all cereals used as animal feed. Toss in the added pressure of biofuels, the magazine reported, and prices are going up — even during a period when food is being produced in relatively large quantities.

Meanwhile, the increased demand for food in rich countries is creating shortages in poor places. The United Nations' top food and agriculture official said Monday that an "unforeseen and unprecedented" shift in food supply and use was creating both higher prices and, for the poor, real shortages, the New York Times reports . The UN's index of food prices has risen more than 40 percent this year, and Jacques Diouf, head of the United Nations Food and Agriculture Organization said there is now “a very serious risk that fewer people will be able to get food.”

Global supplies of basic staples — corn, wheat and rice — are declining. As global demand for these cereals is increasing, Diouf said, the effects of global warming are reducing crop yields in some places.

“We’re concerned that we are facing the perfect storm for the world’s hungry,” Josette Sheeran, executive director of the World Food Program, told the New York Times. She said that her agency’s food procurement costs had gone up 50 percent in the last five years and that some poor people were being “priced out of the food market.”

Economists expect that rising prices and diminishing supplies will set off competition for food between rich and poor nations. "At the end of the day, the fight will be between the industrialized world and the developing world," Michael Lewis, managing director at Deutsche Bank, told the Wall Street Journal.

 

Topics: Ag and TradeFood
x

News Briefs