High Food Prices 'Likely to Persist'

From Mirada Global, a look at rising food prices around the world:

World food prices hit a record in January and recent catastrophic weather around the globe could put yet more pressure on the cost of food, an issue that has already helped spark protests across the Middle East.
 
Up for the seventh month in a row, the closely watched Food and Agriculture’s Food Price Index touched its highest level since records began in 1990. The new figures clearly show that the upward pressure on world food prices is not abating. These high prices are likely to persist in the months to come”, FAO economist and grains expert Absolreza Abbassian said.
 
Several climate events that affected key crops will probably maintain pressure on the prices of food, while the massive cyclone hit Australia, a major winter storm affects the U.S’s grain belt and the floods keep Malaysia under water.
 
Last year’s drought in the Black Sea, the strong rains in Australia, dry weather in Argentina and the forecast of increased demand after the protests in Northern Africa and the Middle East have already raised the price of wheat to its highest in two and a half years.
 
A combination of high oil prices and fuel, increase in consumption of bio-fuel, bad weather and the improvement of future markets made prices rise in 2007-2008, unleashing violent protests in countries like Egypt, Cameroon and Haiti.

Janis Huebner, an economist from German bank DekaBank said that inflation, partly caused by the increase in the price of food, could in turn derive in increase in interest rates in several countries during the year. “This could bring a slowdown in the growth of countries increasing their interest rates”, he said. “And it could affect countries from Asia and other regions, slowing down growth, although I don’t forecast a forced landing”.

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Tim Reidy

 

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Stanley Kopacz
6 years 8 months ago
What do the above conservative commentators think of farm subsidies?  Should they be abolished as a socialist institution?  Our farm goods are cheaper and can be exported.  This causes problems for farmers in poor countries that cannot support their farmers.

Do the above also disapprove of the $36B in government guaranteed loans proposed for the nuclear industry?  Also, the limited liability applied to those who build and run these plants is rather low at $12B when we have seen and are seeing the damage to land, property, health and embryos (how many unnatural abortions resulted from Chernobyl?) that result from a nuclear accident.  Isn't the very idea of limited liability a kind of socialist exercise with the government shielding executives and stockholders from liability for their irresponsibile actions?
6 years 8 months ago

There is an alternative explanation that many people believe explains much or part of these increases. Certainly there is the problem of weather related problems.  However, there have been increases across the board in commodities around the world.  Why should metals and fuels rise when there are food shortages? Certainly not due to the weather.
 
Copper, gold, steel, silver and energy costs are all up dramatically in the last two years.  What is causing this.   The great business boom in the US and the rest of the world.  Hardly, though the rest of the world is doing better than the US.  One reason is that the Fed has printed a couple trillion dollars in the last two years.  This was meant to stimulate the economy but it has had little effect.  The reason is that this money was taken out of the country and invested elsewhere in the world.  This extra money floating around the world has debased the dollar even more and caused more demand for basic commodities such as food and metals.
 
How much of this is the explanation is still unknown but it has definitely had an effect in several countries.  We might want to know why all this is happening.  Why isn't the money being invested in the US and creating jobs?  There are lots of answers but some people might not like the answers.  Maybe because they do not see a good return on their money if it is invested here.  People are searching the globe looking for a return and this country has not been friendly to investment.
 
The real worry is that people will bring the money back here but what will they do with it.  They could give us a 1970's style inflation and I think that is what the Fed hopes.  That way housing prices would rise and people would be able to get out of their underwater loans with the new funny money.  But inflation creates all sorts of bad problems along with the supposedly good.  It took two years for Volker and Reagan to break the back of inflation in the early 80's and there does not seem to be anyone on the horizon that has the cojones to do that now.  Certainly not our present Fed chairman and president.
 
It might work if there is no wage inflation.  Wage inflation is the killer of a good economy and is one reason why we are in trouble today.  Wages don't go back down as commodities do when there is bad times.  Copper and steel and oil can all go down but wages often resist this.  They often go the other direction which is why what Reagan did in 1981 and 1982 so remarkable.  He killed the wage inflation monster in two years setting the table for 25 years of good times.
Tom Maher
6 years 8 months ago
Well this is a change.  America magazine commenting on technical and  economic tevents and rends and their impacts on the world in valid technical terms.

The article also recongzes that we now live in a global ecoonomy.  Conditions impacting  local agriculture production can and do impact the world wide food prices.  This is a real advance for America magazine to present sound economic based cause  and effect analysis of rising food prices and future prospects based on economic factors. 

Too often America magazine would give a moralistic explaination events that would miss the real action going on.  For example world food price increases would be represented greedy people (like on Wall Street their favorite villain) are speculating and thereby driving up prices at the expense of the poor.  These explaination fail to deal with the actual root casue condition of relative shortage of supply of agricultural products.  Liberation theology is not a subsitute for sober market anayiss base on real market conditons that identify facts such as there is not enough food being produced and distributed relative to demand.

JR Cosgrove makes a very excellent point in noting that many other non-agricultural commidities are also going up that have nothing to do with global weather  conditions. Food prices can also go up for valid technical reasons other than supply and demand such as inflation.  If a farmer has to pay more for fuel to produce agricultural goods there will be pressure to increase food prices to cover increase cost of production.   The U.S. Federal Reserve policy of "quantitative easing" QE1 and QE2 did effectively print money which can and does have an inflationary effect on all ptoces in the world.  Worse in the future as the global economy improves worldwide prices could become very inflationary.  China and other Asian countries already have a significant and growing inflation problem. 

Maybe future American magaizine articles can offer economic and technical sloutions polutions to such probems as high food problems or food price inflation.  For example more worldwide food production may be needed to better cover food shortfall and thereby keep food prices lower.  

It would be a real advance to get away from the "liberation theology" backward explainations of world economics.
Tom Maher
6 years 8 months ago
Dave (#4)

Yes indeed local oovernment policies can be a show stopper when it comes to producing enough food.

One of the first goals in international trade and development economics for a country is to be agriculturally self-suffiecent if at all possible which almost  always is very possible. Ironically some many nations with great agronomic potential are the very nations with the worst productivity due to the policies or political system of their own govenemnet. .  .

For example The People's Republic of North Korea for decades missed coming close to feeding its own people.  It ironic quite ironic that Korea is able to develope nuclear weapons and advanced missle designs but can not feed its own people.  There is no agironmic reason for their failure to be able to feed themselves.  And certainly one can not blame Wall Street, imperialism etc. etc.  The problem is their socialied agricultural system is very unproductive to an extreme. 

THe old Soviet Union and China before it allowed private agriculture had the very same ?problem.   ?????????????E?v?e?n? ??????????????Cuba ??i?s? ?n?o?w? ?????????????????a?l?l?o?w?i?n?g? ??????????????????????????????????????????????????? ?p?r?i?v?a?t?e? ?f?a?r??m???i???n???g??? ?i?.?e?.????????????????p?r?o???f???i???t??????????.?????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
Tom Maher
6 years 8 months ago

(continued)

Even Cuba has now after 50 years allowed private agriculture although the state still owns the land.  Cuba in a very lush part of the world has trouble producing enough food from its government owned and operated collective farms.  

In the 21st century is important to note these 20th century economic failures in production of food based on 19th century socialist philoshy/  Sadly nowadays only Catholic intellectuals arnd a few other die-hards are promoting these socialistic or communistic ideas as "liberation theology".  When will they learn that allowing economic freedom is very good thing?  Why hate systems that work and are abundantly productive suchas private ownership of farms worldwide? 
 
Tom Maher
6 years 8 months ago
Stanley (#7)

Yes.  Agricultural subsidies should ber abolished.  This is a unnecessary cost to the taxpayers that has no public beefits but to enrich certain farmers and landowners according to a June . 2009 report by Chris Edward of the Cato Institue titled "Doensizing the Federal Government - Agricultural Subsidies".  The report say agriculture would thrive without subsidies and actually be more effiecent and cheaper, New Zealand has almost no subsidy and they do quite well.

It would be useful in bringing the budget deficits under control lso.  This is a throwback to the agricultural politics a century ago and the Great Depression.  In the 1930 25% of the U.S. population was on farms many of which were small and marginal operations.  This has not been the case for more than a half centruy.  Farm are now mostly larger buinesses.  ANd the farm population is under 1% of the population .  These business can well thrive on their own and provide all agricultural good the nation needs.  Farm Subsidies are not needed and are as you say a kind of corporate welfare which is of course nonsense.

Generally Stanley government should stay the  out of the business of deciding future business prospects and investing in new industries.  America is blessed with private individuals and institution that do this very well without government help. 
Politics should be kept out of economic decisions.

Limited Liability shielding investors has been around since at least the 1800s and works very well.  It would be chaos to sue stckholders most of whom have no knowledge of any business transactions.  They are just investors.  This shield makes investment possible. It has benefited the United States to have plenty of investment capital and it does create jobs.  This is government protecting people's property from unresonable liability. 

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