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Showing posts with label food prices. Show all posts
Showing posts with label food prices. Show all posts
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Food prices
Food prices to go up again, says report
27 May 2009
Prompted by the rise in fuel prices and threats like climate change, food prices will increase again, says a new UN report. To avert another crisis in Asia and the Pacific, it recommends farmers to adopt sustainable agricultural practices and avoid over-intensive cultivation.
Johannesburg: Food prices will rise again by 2015, when economies are expected to have recovered from the global recession, pushing up demand once more, says a recent UN report
- Food prices are still high in many developing countries/ Photo credit: IRIN
2008 is seen as the year of food crises, prompted in part by high fuel prices, but these started declining as the global recession got underway in late 2008 and eventually returned to 2006 levels, though food prices in many developing countries are still higher than they were then.
"This has been a temporary respite," said the report, Sustainable Agriculture and Food Security in Asia and the Pacific, by the UN Economic and Social Commission for Asia and the Pacific (ESCAP).
Citing the International Energy Agency's Energy Outlook 2008, which projected that the price of crude oil would average US$100 per barrel in the 2008-2015 period, and rise again to $120 in 2030, the report predicted that "food prices will rise again, too", partly because of resurgent demand, but also as a result of threats to sustainable agriculture, including climate change.
"Sustainable agriculture involved stewardship of both natural and human resources"
The report warned that unless farmers looked at ways to produce food more efficiently, the food security outlook would be "bleak"; sustainable agriculture involved stewardship of both natural and human resources - maintaining, regenerating or enhancing the natural environment, and ensuring the health of producers by offering them a decent income and working conditions.
Land degradation, brought on partly by over-intensive cultivation, and the use of mineral fertilisers to feed a growing population, was one of the biggest threats to agriculture.
From 1992 to 2002, countries such as India, Laos, Myanmar, the Philippines, Sri Lanka, Thailand and Vietnam increased their use of mineral fertilisers by as much as 90% , the ESCAP report noted.
In South and South-East Asia, around 74% of agricultural land has been severely affected by wind or water erosion, or chemical pollution. "If this process continues at its current rate over the next 50 years, crop output in northeastern China could fall by as much as 40%," the authors estimated
The problems are particularly severe in Central Asia, said the ESCAP report: in Kazakhstan alone, around 66 percent of the total land area has been desertified. Over-intensive livestock-keeping has also put pressure on rangeland
Forests provide critical ecosystem services to the agricultural sector, including pollination and watershed protection, and support to river fisheries. Between 1990 and 2005, deforestation accelerated in the Russian Federation, Cambodia, Vietnam and Papua New Guinea, partly prompted by the high fuel price crisis, which drove poor people to take more wood from the forests.
Water resources are also drying up, partly as a result of greater pressure being placed on agriculture by the increased demand for food. Globally, 15% to 35% of total water withdrawals for irrigated agriculture are estimated to be unsustainable – "that is, the use of water exceeds the renewable supply," the report commented.
In Asia and the Pacific region, this intensive withdrawal has depleted aquifers, particularly in South Asia and China, and has even reduced the flow of major waterways like the Ganges and Yellow rivers.
"The data showed that food prices rose 5.6 per cent in April, a higher rate than the 4.2 per cent reported a year earlier, but slower than the 7.3 per cent rise reported in March, and well below the massive 8.6 per cent jump recorded last August.
Prices of soft commodities like wheat, corn and soy almost trebled between 2006 and the market peak in early 2008, as growing consumer wealth in developing economies led to soaring demand. Between 2001 and 2007, China and other emerging economies accounted for a 26m metric tonne average annual increase in consumption of major food stocks."
"There were several explanations of why prices peaked as they did last year. One was that general economic activity forced up oil prices, which increased the costs of fertiliser and harvesting. Another was that rising living standards encouraged more people to buy meat products, and the diversion of cereal crops to animal feed imposed stresses on supply. Another argument involved biofuels, although I think that that debate got a little out of hand. Nevertheless, certainly in the United States, biofuel production took maize away from food production without delivering a great benefit in terms of fuel. Of course, there were also climate change factors—water shortages, desert conditions and crop failures for climatic reasons—and population growth pressures that contributed to what happened last year.
This year, some of those factors still exist, but additional ones have crept in. For example, the effect of the downturn has meant that many of the poorest people in the poorest countries have suffered a massive downturn in income, particularly due to the loss of remittances. That means that many of those people are poorer than they were before. Even though prices have come down from the peak, they are still historically high at a time when incomes are historically low. To a substantial degree, that is why the WFP is saying that it needs more this year than last year to address the needs and pressures that it faces."
Interactive BBC site on food prices
Podcasts on food - worth listening to
"It is a viewpoint shared by Oxfam's Barbara Stocking, who told the BBC News website: "It takes the same amount of grain to fill an SUV with ethanol as it does to feed a person. We don't want any more subsidies for biofuels. This rush to biofuels is absolutely dreadful."
Sunday
Food prices debate
Soft commodities are hardening. Corn, wheat, cocoa and coffee prices have all risen strongly in recent months, suggesting consumers will face an extended period of more expensive food prices.
Can poorer farmers hope to benefit from the rising demand for food? How will the rise in global food prices affect consumers? And can the world continue to feed its expanding population?
Read the debate in the Financial Times here
Questions about food prices
Food prices are rising. Rice is just the latest staple to soar through record levels as increasing demand and lagging supply on global markets prompt exporters to restrict their sales to quell food price inflation at home.
Similar moves by major wheat and soyabean exporters announced earlier this year have helped keep prices near record levels, while record corn prices continue to be underpinned by rising demand from China and from the biofuels industry.
Are staple foods poised to reach luxury prices, or is the current surge in agricultural commodities a bubble waiting to burst?
Food crisis and China
For the Group of Eight ministers of agriculture meeting for the first time on Saturday 9there will be no greater example of the dilemma faced in feeding a growing population than China.
The world's largest agricultural economy makes the ministers wary because of its huge and expanding food needs: but also curious at Beijing's success in weathering last year's global food crisis better than most emerging economies.
Ever since China entered its phase of high economic growth 30 years ago it has faced apocalyptic warnings that its increasing demand for food would lead to shortages worldwide.
By and large, these warnings have turned out to be wide of the mark.
Yet in spite of its success in coping with last year's crisis, Beijing still has to feed its population with limited fertile land, scarce water and the threat of climate change.
Given China's size, if these problems are not addressed they will have huge effects on global agricultural markets as Beijing will have to import large amounts of food, tightening markets and sending prices higher.
At a time of heightened concerns about food security, illustrated by the G8 meeting, Beijing's challenge is a concern both at home and beyond. The G8 has warned that, without a doubling of spending by 2050, the global food crisis "will become structural".
China's response to the global and domestic challenge has won praise.
Food price drivers
"So was the great global food shortage and the agriculture supercycle all a mirage? Not so, says Richard Warburton, head of agribusiness at Bidwells, a specialist consultancy. “The main drivers remain pretty much intact,” he says, adding “there’s quite a lot of confusion over the impact of the financial crisis.”
The main drivers he refers to are population increases, dietary shift and the growth of biofuels. Only the dietary shift – increasing demand for meat as large numbers of people get richer – is likely to be affected by a global slowdown.
“There were vast numbers of people going through the two dollars a day barrier and starting to eat more meat,” says Mr Warburton. “That may slow, but not much.”
Read more here
Why are food prices rising?
Food prices have been rising steadily in the past few months and the effects are being felt globally. As agricultural commodities such as wheat and dairy trade at record highs, some governments, such as Russia, are implementing price controls on selected types of bread, cheese, milk, eggs and vegetable oil.
But why is food getting more expensive? What role do biofuels play and how has the weather affected crop yields this year? How does the cost of oil factor into the price of food?More here from the excellent Financial Times
Japanese jitters and food security
"The Japanese government is drawing up plans to finance investments in agricultural production in developing countries, in the latest sign of nervousness about food security among countries that import agricultural commodities.
Tokyo is looking to identify regions that could benefit from Japanese investment and assistance to increase food production, according to the country’s agriculture ministry.
The investment plans are, nonetheless, of a different nature from those of countries such as South Korea and Saudi Arabia, which are investing in farmland in order to export back the crops to feed their own population. Tokyo is planning to sell crops on the global food market, according to experts and diplomats familiar with Japan’s agriculture policy.
Munemitsu Hirano, director for international trade policy negotiations at the Ministry of Agriculture, Forestry and Fisheries, said Japan might not be guaranteed stable food supplies as a result of its investment efforts. But he told the Financial Times: “If [food] production increases worldwide that will help Japan to import.”
Tokyo has long supported ventures into agriculture by Japan’s trading houses – particularly in soya bean production in Latin America after it was spooked by its large dependency on the US during the brief US soya bean embargo of 1973. Itochu and Marubeni, two of the country’s trading houses, have said in the past year they wanted to boost their agricultural production and have signed deals with China to supply Beijing with agricultural commodities, particularly soya."
Food prices
The UN’s Food and Agriculture Organisation’s findings show that poor countries continue to suffer the impact of high food prices. The blow was now compounded by sharply lower economic growth and remittances, said food aid officials.
“The food crisis has not gone away. In fact, it is coming back,” said Christopher Delgado, a policy adviser in agriculture at the World Bank, at a recent conference, who justified its warning on high local prices.
Food aid officials attribute the disconnect between local and international food prices to time lags, poor harvests in developing countries and in some cases to the difficulties of importing agricultural commodities due to the lack of trade finance.
The FAO will unveil on Thursday a tool to monitor about 800 monthly domestic retail and wholesale prices of main foods consumed in 55 developing countries. Until now, information on local prices was patchy.
Food price inflation hits the poor hardest, as the share of food in their total expenditure is much higher than that of wealthier populations, according to the FAO. Food represents about 10-20 per cent of consumer spending in industrialised nations, but as much as 60-80 per cent in developing countries, many of which are net-food-importers.
Although the price of corn, wheat, rice and other food staples in international markets has tumbled between 60 and 40 per cent from the all-time highs of last year, local food prices in most sub-Saharan African countries are today higher than a year ago, the FAO data show.
Retail rice in Malawi was quoted at 210 kwacha ($1.50, €1.11, £1.05) a kilogram, almost double that of a year ago. In Zambia, white maize, the main staple, cost in local markets 28,185 kwacha ($4.97, €3.69, £3.48) per 20kg, up from 17,500 kwacha a year ago.
Food prices
Argentina is the world’s second biggest exporter of agricultural commodities and sales of soya and corn are critical to importers such as China, who turn to Argentina and Brazil until US harvests become available.
The farmers were protesting at about 60 points in northern and central Argentina and have staged roadblocks, occasionally forcing truckers to dump loads.
Strike fears helped push soya prices in Chicago nearly 8 per cent higher last week. Wheat, corn and meat prices also rose.
“The stand-off between Argentine farmers and their government is worsening, threatening further drawdown of an already tight US soyabean carry over,” said Richard Feltes, head of commodities research at MF Global, a brokerage in Chicago.
The US Department of Agriculture sees US soyabean inventories falling this season to a five-year low of 5m tonnes, from 15.6m in 2006-07.
Though farming is Argentina’s top export earner, the country has become increasingly unreliable in world markets. Farmers have used halting of overseas sales as the main bargaining tool since the confrontation over export tariffs began a year ago, and the government at times bans corn, wheat and beef exports to protect local supplies and prices.
Farmers see the plan to share 30 per cent of the soya tariffs as a bid to buy the support of governors.
Read more here
Food prices in Britain
"Shoppers in Camberwell, a short bus ride from Dulwich and among the most deprived wards in the country, also said food prices were increasing.
“I don’t eat as much meat as I used to because it is so expensive. At the end of the week, you think, ‘Oh crikey’,” said Becky Smith, 33, a student. “I have noticed prices have gone up a lot. I try to budget shop, but there are lots of queues and they have gotten longer in the last few months.”
Jane Taylor, 50, a housewife, agreed: “The main things I buy are mince meat, sausages and a joint for Sunday, and from the beginning of the year they went up.” She was unimpressed with supermarket discounts. “They try and con you in shops by saying they’ve got offers, but you’re still paying for it one way or another.”
Residents also complained that their utility and housing costs were rising.
“Electricity has gone up – you put £10 ($15) in the electricity meter and it’s gone immediately. Rents have also gone up, nothing has gone down,” said Charlie Adams, 22, who is unemployed.
Carol Fodili, 53, a childminder, said rents had risen: “The electricity and gas bills have also gone up, but they’re saying they’ll be reduced again in April.”
Teresa Brown, 52, a care worker living in social housing, said: “Apparently my rent from the council hasn’t gone up, but I think electricity has gone up a little bit.”
Good enough to eat?
"When I heard peanut products were being contaminated earlier this year, I immediately thought of my seven-year-old daughter Sasha, who has peanut butter sandwiches for lunch probably three times a week,” he told the nation in one of his weekly addresses from the White House. “No parent should have to worry that their child is going to get sick from their lunch.”
Citing the “troubling trend” that had seen the average number of disease outbreaks due to food contamination rise to some 350 a year, up from just 100 or so in the early 1990s, Mr Obama announced he was setting up a working group on food safety made up of cabinet secretaries and senior officials. He also promised to overhaul America’s “underfunded and understaffed” Food and Drug Administration."
Food price volatility
Why may food prices start rising again raising fresh fears of high food price inflation? The key is to understand the reactions of farmers to changes in prices and the decisions they make about whether to plant new crops on marginally productive land.
"If inflation comes roaring back, the first place many people feel the pinch may be in food prices. The cost of corn, soya and wheat has fallen sharply from the levels they reached last summer at the height of the commodity boom. But lower prices mean lower returns per acre, so farmers are cutting plantings of marginally productive land to maximise profits.
European farmers cut plantings of winter wheat 2 per cent this year. In the US, which supplies half the world’s corn and a fifth of its wheat, officials expect plantings of those crops to decline 1.2 per cent and 7 per cent respectively. The US Department of Agriculture says aggregate 2009 plantings of the eight biggest grains could fall the largest amount in 20 years.
Food prices might rise even in the absence of an economic recovery. Export stockpiles are tight. That has not been a big problem in recent years thanks to an unusually long spate of good weather. At some point, that lucky streak will end.
Such concerns help explain why food prices have not fallen as far as those of other commodities. Prices for corn, wheat, soya and rice have dropped nearly half from their 2008 peaks, but they are still trading at about double their average prices of the past 10 years. Corn, at $4 a bushel, costs the same as it did in 2007. Aluminium, by contrast, is trading at levels not seen since 2003. Natural gas prices have not been so low since 2002. Food prices are unlikely to fall into line with those of other commodities. Indeed, they may not have anywhere to go but up."
(1) How could you illustrate the process described above with supply and demand diagrams?
(2) Explain why price elasticity of demand and price elasticity of supply is relevant in explaining food price volatility
(3) What do you understand by the term ‘marginally productive land’?
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