Sunday, April 13, 2008

The Price Of Food

Below are trends in global food prices from a report of the Food and Agriculture Organization (FAO) of the United Nations. 1 The graph on the left is for all food commodities over the last three years. The graph on the right is for selected commodities over the last year (Click for larger):

Prices for all foods have risen since the beginning of the year, except for, by the look of this, dairy. Prices of cereals (and the oils associated with them) have been particularly hard hit, with the price of rice leading the pack:

The FAO says this is the result of "a persistent, tight supply and demand situation."

What Is Fueling Demand?

BBC did a nice FAQ on Rising World Food Prices. Their take:
  • Growth in the world's population - more mouths to feed.
  • Emerging economies such China and India are generating a new tier of middle-class consumers who buy more meat and processed food. "The FAO estimates that processed food now accounts for 80% of food and beverage sales." (Holy cow.)
What Is Tightening Supply?
  • Growth in the world's population - puts pressure on resources, including land, water and oil supplies.
  • Climate change - causing changing patterns of rainfall, floods, droughts, and desertification - all lowering production.
  • Global warming - the shift towards biofuels (which emit fewer greenhouse gases) is reducing the amount of land available for food crops. (Ethanol production will account for 30% of US corn crop by 2010).
Have you noticed the price of a particular food increase recently?
1 Crop Prospects And Food Situation, FAO, April 2008.

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