Food prices

Food prices refer to the (averaged) price level for food in particular countries or regions or on a global scale. The food industry's contribution to the price levels and fluctuations come from the food production process, food marketing and food distribution. Source of uncontrollable price fluctuations are varying crop yield from excess supply to harvest failure and food speculation activities. It is speculated that already the global climate change could be a major factor behind rising food prices.^[1] A continuing drought in South Africa^[2] may - amongst other factors - have food inflation soar 11% until end of 2016 according to the South African Reserve Bank.^[3] To a certain extent, adverse price trends can be counteracted by food politics. When food commodities become too expensive on the world market, food security is in danger especially for developing countries. In keeping with the supply and demand-principle, global prices will on average continue to rise with the growing world population.

Global differences

Sharp dramatic rises in the food inflation as happened during the 2007-08 world food price crisis have been more pronounced in developing countries than in the OECD and North America in particular, however.^[4][5]

Consumer prices in the rich countries are massively influenced by the power of discount stores and constitute only a small part of the entire cost of living. In particular, Western pattern diet constituents like those that are processed by fast food chains are comparatively cheap in the Western hemisphere. Profits rely primarily on quantity (see mass production), less than high-price quality. For some product classes like dairy or meat, overproduction has twisted the price relations in a way utterly unknown in underdeveloped countries ("butter mountain"). The situation for poor societies is worsened by certain free trade agreements that allow easier export of food in the "southern" direction than vice versa. A striking example can be found in tomato exports from Italy to Ghana by virtue of the Economic Partnership Agreements where the artificially cheap vegetables play a significant role in the destruction of indigenous agriculture and a corresponding further decline in the already ailing economic power.^[6][7]

Data sources

FAO food price index

Annual real food price indices. The peaks in 2008 and 2011 indicate global food crises

The FAO food price index is a measure of the monthly change in international prices of a market basket of food commodities. It consists of the average of five commodity group price indices, weighted with the average export shares of each of the groups for 2002-2004:^[9]

1. FAO Cereal price index
2. FAO Vegetable oil price index
3. FAO Dairy price index
4. FAO Meat price index
5. FAO Sugar Price index

Year	nominal price idx	deflated price idx
1990	107.2	100.4
1991	105.0	98.7
1992	109.2	101.1
1993	105.5	97.1
1994	110.3	101.3
1995	125.3	105.3
1996	131.1	113.7
1997	120.3	111.3
1998	108.6	105.6
1999	93.2	92.6
2000	91.1	92.4
2001	94.6	101.0
2002	89.6	96.2
2003	97.7	98.1
2004	112.7	105.0
2005	118.0	106.8
2006	127.2	112.7
2007	161.4	134.6
2008	201.4	155.7
2009	160.3	132.8
2010	188.0	150.7
2011	229.9	169.1
2012	213.3	158.8
2013	209.8	158.5
2014	201.8	152.0
2015	164.0	123.2
2016	151.6	112.3

Grocery Foods Economics

In the long term, prices are expected to stabilize.^[11] Farmers will grow more grain for both fuel and food and eventually bring prices down.^[11] This has already occurred with wheat,^[12][13] with more crops planted in the United States, Canada, and Europe in 2009. However, the Food and Agriculture Organization projects that consumers still have to deal with more expensive food until at least 2018.^[11]

It is rare for the spikes to hit all major foods in most countries at once. Food prices rose 4% in the United States in 2007, the highest increase since 1990, and are expected to climb as much again in 2008. As of December 2007, 37 countries faced food crises, and 20 had imposed some sort of food-price controls. In China, the price of pork jumped 58% in 2007. In the 1980s and 1990s, farm subsidies and support programs allowed major grain exporting countries to hold large surpluses which could be tapped during food shortages to keep prices down. However, new trade policies have made agricultural production much more responsive to market demands, putting global food reserves at their lowest since 1983.^[11]

Food prices are rising, wealthier Asian consumers are westernizing their diets, and farmers and nations of the third world are struggling to keep up the pace. Asian nations have contributed at a more rapid growth rate in the past five years to the global fluid and powdered milk manufacturing industry. In 2008, this accounted for more than 30% of production with China accounting for more than 10% of both production and consumption in the global fruit and vegetable processing and preserving industry. The trend is similarly evident in industries such as soft drink and bottled water manufacturing, as well as global cocoa, chocolate, and sugar confectionery manufacturing, forecast to grow by 5.7% and 10.0% respectively during 2008 in response to soaring demand in Chinese and Southeast Asian markets.

Rising food prices over recent years have been linked with social unrest around the world, including rioting in Bangladesh and Mexico,^[14] and the Arab Spring.^[15]

In 2013, Overseas Development Institute researchers showed that rice has more than doubled in price since 2000, rising by 120% in real terms. This was as a result of shifts in trade policy and restocking by major producers. More fundamental drivers of increased prices are the higher costs of fertiliser, diesel and labour. Parts of Asia see rural wages rise with potential large benefits for the 1.3 billion (2008 estimate) of Asia's poor in reducing the poverty they face. However, this negatively impacts more vulnerable groups who don't share in the economic boom, especially in Asian and African coastal cities. The researchers said the threat means social-protection policies are needed to guard against price shocks. The research proposed that in the longer run, the rises present opportunities to export for Western African farmers with high potential for rice production to replace imports with domestic production.^[16]

See also

References

Literature

• Eric Holt-Gimenez , Raj Patel, eds. (2009). Food Rebellions: Crisis and the Hunger for Justice. Food First Books. ISBN 978-0935028348.CS1 maint: Uses editors parameter (link)
• Fast Food Nation: What The All-American Meal is Doing to the World. 2002. ISBN 978-0141006871.

External links

• "1975 food prize study, part 1". prepared by the staff of the Select Committee on Nutrition and Human Needs, United States Senate. 1975.
• "1975 food prize study, part 2". prepared by the staff of the Select Committee on Nutrition and Human Needs, United States Senate. 1975.
• "Food price outlook 2016". Economic Research Service in the U.S. Department of Agriculture.
• "Food prices". Financial Times.
• "Fast food prices". Places to Eat Near Me.