Rising Food Prices and Possible Reasons

[Fingolfin_Noldor]

Ok, so food prices are rising, but what are the reasons motivating this? Sure the topic has been tossed around, but I would like to know the magnitude of the effect of each reason. So far, I have heard that:

1. The diversion of crops for biofuel is one reason.
2. Rising oil prices leads to higher costs involved in food production and transportation.
3. Rising consumption might be also a reason.

The above 3 seems to be the popular reasons, but are there more and can all these reasons, including the above be quantified in any reasonable way? Also, how do subsidies (and crop buy backs) figure in the entire cost matrix?

[Knife]

Rising oil prices leads to higher costs involved in food production and transportation

This will be a big one, especially in large countries and/or those who import a lot of their food.

[Admiral Valdemar]

More humans around? Fortunately, we prepared for this predicament by having militaries with more efficient weapons.

Supply can meet demand when the demand dies off a little. Literally.

[Lettuce]

I saw something about problems with wheat crops too. Demand is up and the crops aren't doing well this year.
They said that it would cause local pizza shops to raise their prices.

[K. A. Pital]

They said that it would cause local pizza shops to raise their prices.

And also, just as side effect, it already caused people in hunger and malnourished in Central Asia.

More humans around?

The prices were more or less stable in the prior years - but them going up added to exploding Third World populations is the bad juju.

The above 3 seems to be the popular reasons, but are there more and can all these reasons, including the above be quantified in any reasonable way?

Indeed; I believe they can be quantified. To deduce the impact of biofuels, for example, you will just need to build price matrices and analyze volumes sold for food and for biofuel production; as well as how many acres were re-oriented to biofuels (as a means to project later losses of food production volumes).

The transportation prices can be deduced to oil rise + the price hikes of middlemen, for countries heavily employing automobile cargo-moving.

Rising consumption, in calories, in China and India, could be calculated as well.

[Broomstick]

I saw something about problems with wheat crops too. Demand is up and the crops aren't doing well this year.
They said that it would cause local pizza shops to raise their prices.

There are two issues with the US wheat crop.

1) Fewer acres planted - because of rising corn prices, subsidies, interest in corn for biofuel, etc, there are farmers opting to plant corn instead of wheat.

2) Weather problems - some years are better than others, that has always been the case.

However, #2 is more severe a problem than in the past due to #1. When wheat was plentifully planted any shortfall due to adverse growing conditions would be compensated for by simply exporting less and keeping more at home. Problem is, this year, due to the interaction of 1 and 2, the US may, for the first time in a long long time, wind up importing wheat.

If wheat prices spike due to all this I would expect the problem to at least partly self-correct the following year as more farmers will plant wheat because higher wheat prices make that crop more attractive.

If it doesn't - well, I'm unlikely to give up bread entirely, but I can happily eat more rice and quiona if those grains are more reasonably priced.

In the US at the present I think transportation costs are our biggest driver of rising food prices, with biofuel only a relatively small impact (aside from corn availability). In other places other factors come into play, and climate change will probably play a bigger role in the future. In US, there's enough know-how and wealth to either develop crops more suitable for the changed climate, or to adjust which crops grow where. For smaller, less wealthy nations this could be a huge problem. Likewise, rising populations/consumption is not such a problem in North America, Australia, and Europe but could have a big impact in Africa, the Indian sub-continent, and parts of Asia.

[cosmicalstorm]

Well it seems the fun is already getting started in Egypt;

CAIRO, Egypt (AP) -- Clashes have been breaking out among Egyptians waiting in long lines for subsidized bread and the president has ordered the army to start baking more to contain a political crisis.
art.egypt.bread.ap.jpg

Egyptians line up for bread in Giza on Sunday.

The turmoil in the world's most populous Arab country is a stark sign of how rising world food prices are roiling poorer countries.

Government bakeries sell subsidized versions of the flat, round bread that is a staple of people's diets.

Acute shortages of subsidized bread, which is sold at less than one U.S. cent a loaf, have caused hours-long lines and violence at some sites in poor neighborhoods in recent weeks.

At least seven people have died, according to police. Two were stabbed in fights between customers in line, and the rest died of exhaustion or other medical problems aggravated by waiting in the spring heat.

Independent and opposition parties have been sharply critical of President Hosni Mubarak's government, calling the long lines a sign that his government is failing.

"Our life has become so miserable," said one worker, Saber Ahmed, who spends up to four hours daily in bread lines to get 20 pieces of bread for colleagues at the cafe where he works.

The 17-year-old, wearing a ragged T-shirt as he stood in a long line, said he and co-workers can't afford unsubsidized bread, "or any food to eat with it."

Any Egyptian can get subsidized bread under a decades-old system that also provides subsidies for public transportation and gasoline for all. The system also provides subsidies for some other food staples specifically for the poor.

Demand for the subsidized bread has grown steadily in recent months as rising commodity prices -- especially for flour -- have made unsubsidized bread less affordable.

More than 20 percent of Egypt's 76 million people live below the poverty line, according to the World Bank. Unsubsidized bread can sell for 10 to 12 times the subsidized price.

The supply of subsidized bread has been decreasing. Many people in Egypt believe subsidized bakeries sell some of their flour on the black market rather than make bread.

Last week, Mubarak ordered the army to increase the production and distribution of subsidized bread to cope with the shortages.

The army and the Interior Ministry, which controls the police, own bakeries that they normally use to feed their employees.

In recent days, the army has opened 10 large bakeries in Cairo to produce cheap bread and has set up about 500 kiosks to sell bread to the public, said Minister of Social Solidarity Ali Meselhi.

The state-owned Al-Ahram newspaper said Mubarak's order to the armed forces to intervene "means that he has declared an emergency state to combat this crisis."

Another columnist in the paper called the bread riots "a very critical moment" for Egypt, demonstrating the gap between rich and poor.

Egypt grows about half of the more than 14 million tons of wheat it consumes every year.

It has also long been one of the top importers of U.S. wheat, using about $54 million of some $2 billion a year in U.S. aid to buy it. But its U.S. purchases have been falling as it searches for cheaper sellers on the world market, where prices have tripled in the last 10 months.

Mubarak has ordered the government to use foreign currency reserves to buy additional wheat, according to his spokesman Suleiman Awad.

The government also will add 15 million new names to the list of those receiving cheap rations of cooking oil, sugar and rice. That and other measures will increase the government's annual food subsidy costs by $3.1 billion to a total of $13.7 billion this year. E-mail to a friend E-mail to a friend

[K. A. Pital]

And Egypt joins the fray.

The 17-year-old, wearing a ragged T-shirt as he stood in a long line, said he and co-workers can't afford unsubsidized bread, "or any food to eat with it."

You can always sell your home to eat, remember.

[Ace Pace]

And Egypt joins the fray.

The 17-year-old, wearing a ragged T-shirt as he stood in a long line, said he and co-workers can't afford unsubsidized bread, "or any food to eat with it."

You can always sell your home to eat, remember.

It's not suprising that people in such situations would be willing to just pick up arms and fight. It's not making their situation any worse(from their point of view).

[nickolay1]

"Our life has become so miserable," said one worker, Saber Ahmed, who spends up to four hours daily in bread lines to get 20 pieces of bread for colleagues at the cafe where he works.

Ahh, unpleasant memories of times after Soviet collapse...

[pucky18]

Global warming is one big factor, as is the aforementioned population growth. Also, in many developing countries people are beginning to eat much more per capita, driving demand up.

[Voluntaryist]

Another reason for rising food prices, at least in the US, is due to inflation. The dollar has lost quite a lot of value in a short amount of time, and staple goods in the US are becoming more expensive as a result.

[Kodiak]

Another reason for rising food prices, at least in the US, is due to inflation. The dollar has lost quite a lot of value in a short amount of time, and staple goods in the US are becoming more expensive as a result.

save it for the debate, Volleyball

[Surlethe]

Another reason for rising food prices, at least in the US, is due to inflation. The dollar has lost quite a lot of value in a short amount of time, and staple goods in the US are becoming more expensive as a result.

save it for the debate, Volleyball

Isn't he right, though? The dollar has lost quite a bit of value in the past few years, which means that goods in the US are becoming more expensive because demand for US goods in the rest of the world is rising.

[Voluntaryist]

Thank you Surlethe,

And yes I am right in that the drop in the dollar value is one of the reasons that staple goods are rising in cost, at least in the US.

Gold is at an all time high, and of course it isnt cause gold is just suddenly more valuable, but its because the dollar is worth less comparatively. So high gold price really is a sign of a low dollar value.

Look at these gold price charts.

However, the drop in the value of the dollar makes US made products cheaper abroad, and the US does export lots of food products.

Look at these charts for example comparing the USD to other currencies:
US dollar vs Canadian
US dollar vs Euro

(And btw Im almost ready to post my reply in the debate, its on its 2nd draft and after rewriting drafts I let them sit for a couple hours so I can reveiw them with "fresher" eyes. So its kind of silly for people like Kodiak to pester me just cause Im trying to contribute userful info to conversations in other threads.)

[Fingolfin_Noldor]

Doesn't the US mostly consume its own food? Sure, oil adds to the mix with regard to processing and transportation, you will get price increases, but how do currency exchange rates figure in this?

[Surlethe]

Doesn't the US mostly consume its own food? Sure, oil adds to the mix with regard to processing and transportation, you will get price increases, but how do currency exchange rates figure in this?

The US is a net food exporter. Even so, the currency exchange rates figure in this because a dropping US dollar in general makes US-produced goods a more valuable buy. This happens since the same amount of x currency will buy more dollars -- and hence more US goods -- as the value of the dollar drops. So the demand for US goods, and in particular food, rises; this of course puts an upward pressure on food prices.

[Broomstick]

Doesn't the US mostly consume its own food? Sure, oil adds to the mix with regard to processing and transportation, you will get price increases, but how do currency exchange rates figure in this?

Currency rates are a factor because we import our petroleum-derived products. The more expensive oil and related products are the most it costs to transport food over a distance.

Since we do silly things like, say, grow 90% of a particular crop in just one or two states we can wind up transporting basic staple foods thousands of miles on a daily basis. Fine, when transportation was cheap. A big problem when transportation is costly.

[Sarevok]

This is getting scary. The situation in Egypt described in the article is eerily similar to what I am witnessing. Goverment subsidized food, long lines for grain,bread and cooking oil watched by paramilitary forces, tremendous discontent of the poorer citizens it is all there. Fertilizer prices has been rising too and importers cant keep up with demand or are hoarding. It has been going on for past 3-4 years I think. I always brushed it off as generic third world woes. But to see the entire world display same signs... it's disconcerting.

Looking back closer to home the sudden change of status between food exporting nation to starvation is discomforting. Especially when I see the new elite classes created in the boom years of 90s and 2000s. They eat imported food at chic restaurants at prices that could feed a lesser family for a month. And I wonder how long before the hammers and sickles on a crimson banner are revealed.

[K. A. Pital]

Looking back closer to home the sudden change of status between food exporting nation to starvation is discomforting.

Same here. Our food situation wasn't exactly stellar, but people weren't getting malnourished so routinely and in such large numbers.

Russia grows record harvests and sells them off, but people's calorie availability falls and more and more fall to malnourishment.

We issued some export bans and price controls, but those will not help if the situation springs out of control like it does now.

[Adrian Laguna]

Russia grows record harvests and sells them off, but people's calorie availability falls and more and more fall to malnourishment.

Weren't they doing that 90 years ago? I seem to recall that this was one of the (many) reasons why everyone and their dog hated the upper classes so much.

[Fingolfin_Noldor]

Russia grows record harvests and sells them off, but people's calorie availability falls and more and more fall to malnourishment.

Weren't they doing that 90 years ago? I seem to recall that this was one of the (many) reasons why everyone and their dog hated the upper classes so much.

Is there a likelihood of communism and any socialist ideal or some French Revolution redux coming back in force with all this tension brewing over high food prices?

[cosmicalstorm]

Russia grows record harvests and sells them off, but people's calorie availability falls and more and more fall to malnourishment.

Weren't they doing that 90 years ago? I seem to recall that this was one of the (many) reasons why everyone and their dog hated the upper classes so much.

As far as Russians are concerned things are only getting better by the year compared to the mid 90's situation if im not completely mistaken.

[K. A. Pital]

As far as Russians are concerned things are only getting better by the year compared to the mid 90's situation if im not completely mistaken.

Yes, but in the mid-90s the yields were very low and the agriculture was in a deep malaise, which made the problem worse, as well as several crises which devaluated people's savings, the currency and ruined lots of things.

Today we have yields of 70-80 million ton per year, which falls short of the pre-90s times (100-110 million ton per year yields), but technically should greatly increase calorie rations of people.

That doesn't happen due to poverty and a great deal of people from whom food remains a tense financial question.

Hell, you may not believe, but even me with a modest but well-off salary don't just go to shop and look around as if I could by anything. Far from it.

[The Grim Squeaker]

Russia grows record harvests and sells them off, but people's calorie availability falls and more and more fall to malnourishment.

Weren't they doing that 90 years ago? I seem to recall that this was one of the (many) reasons why everyone and their dog hated the upper classes so much.

Stas, this was also done during the Communist period, for funds (During Stalin's period), this causing some of the worst famines (After China) of the century, correct? Or am I confusing two seperate communist era things? (Damnit, we need a history forum to replace loaned books as a resource already ).

Also, you mentioned new pricing/export taxes a few months ago, I take it that the surge in prices has made these less effective, or were they never properly implemented?