Food Prices Rising Across the Globe

For the past eight years food prices have risen steadily. In the last three years general food prices have risen 83%, half that increase coming from 2007, and prices are expected to continue their trend (U.N. Food and Agriculture Organization). The Haiti prime minister was forced to resign by the hungry people of his country; in Indonesia 23 people were killed on a stampede to receive food handouts worth only $4.25; the amount of disposable income in the Untied States continues to drop, and world bank president Robert Zoelick has said that the high food prices could mean "seven lost years" in the fight against worldwide poverty. The question is why are food prices going through the roof and what can be done to bring them back under control in the future.

Food prices have risen in the past 8 years from a cocktail of different causes. The most notable and widely accepted by economists is the rise in fuel prices. When fuel prices began to rise food followed immediately. Modern farming relies heavily on oil to harvest and produce foodstuffs. Machinery from tractors to mills all require a significant amount of fuel to function. Following production, the distribution of the food uses up mass amounts of oil. Many countries are not self sufficient in their food production and rely entirely on imports. Thus oil fueled planes, boats, and trucks, are needed to export the food to countries across the globe. As the price of oil rises farmers must raise the price of their food in order to accommodate the extra expenses. Because production and distribution of food is directly based on oil, the two prices are directly connected.

A staggering amount of countries rely on these imports because the world food industry is the most condensed global industry in the world. The top five corn producers grew 77% of the world's supply; rice producers, 73%; beef and wheat producers, 66% each (Food and Agriculture Policy and Research Institute). This limits the amount of countries with significant amounts of farms within their borders and maximizes the number of countries who must rely on expensive fuel guzzling imports. Such a concentrated market also emphasizes the effect that each producer has the potential to make. In 2007 Australia experienced a major drought. One of the top wheat producers in the world was located in Australia and their production was greatly reduced. This drop in production affected the net production of wheat to such an extent that it doubled the price of wheat in the global market.

When India heard about the drought in Australia, they quickly switched their government food program to be based on rice instead of wheat. In order to accommodate the switch they were forced to halt a large portion of the rice they exported from their country and save it for themselves. Vietnam and Egypt no longer had rice to buy from India and were forced to stop all exports from their countries' farms as well. They took all their rice off the international market causing the supply to plummet. This sky-rocketed the demand for rice and thus the price. In two years rice went from $333 dollar a ton to $963 by May 2008. The concentration of the market allowed for a single drought to cause mass distrust in the food market and worldwide panic and hoarding.

Besides having food hoarded off the market, many farmers have found greener pastures in which to put their efforts to use, or in this case yellow pastures. The use of crops, especially corn, for bio-fuels is a rapidly increasing trend. It is encouraged by talks of global warming, government subsidies, wars in the Middle East and high oil prices, but most importantly it is extremely profitable to farmers. In 2006, the United States began construction on 73 ethanol refineries in addition to the previously existing 110. The U.S. is the biggest supplier of corn to the food market, contributing 40-50% of the world's corn each year (World Bank). The U.S. government aims to produce 7.5 billion gallons of biofuel per year by 2012. 37 governors of the United States want to raise the goal to 12 billion gallons a year by 2010. President Bush further upped the ante and raised the goal to 35 billion gallons a year by 2017. The United States is not alone in its quest for biofuels. The European Union as well as Brazil and other South American and Southeast Asian countries have even more ambitious goals for the mass production of biofuels in the future.

While the presence of the massive biofuel industry is undeniable there is much debate on its effects on food prices. Many economists and human rights groups say it is taking more and more crops, and land to grow crops, away from the food market and thus rising prices. The amount of corn for 25 gallons of ethanol, (about one gas tanks worth) if it we're harvested for food, contains enough calories to feed an adult for a year. Jean Seigler of the U.N. has said that using food crops for biofuels is "a crime against humanity". In an interview with CNN, Jeffrey Sachs of Columbia University says "We've been putting our food into the gas tank - this corn-to-ethanol subsidy which our government is doing really makes little sense."

However, some disagree with the claim that the biofuel industry takes away food from consumers. The renewable fuels association says on its website that "numerous statistical analyses have demonstrated that the price of oil -- not corn prices or ethanol production -- has the greatest impact on consumer food prices because it is integral to virtually every phase of food production, from processing to packaging to transportation."

While drought, hoarding, and in some opinions, biofuels, have lowered the supply of food, the demand for it continues to increase. Rapidly developing countries such as China and India are using their newfound wealth to demand as much food as they can get. However, this increase in demand has a nasty side effect. The Chinese and Indians wish to buy more meat than they ever have before. In response, the meat and poultry industry grows larger in order to accommodate its new consumer base. In order to sustain the larger quantity of cattle and poultry, they must buy more feed for them. This consumption increase raises prices even further by taking more basic foodstuffs off the market.

Different solutions on different levels have been discussed about this growing issue. Iain Ferguson, the president of the UK's Food and Drink Federation, has suggested investment and research in genetic modification of crops, even though in the past this science, in his words, "has been clouded by suspicion and a lack of trust." An advocacy group for small and medium scale farmers, La Via Campesina, urges all governments to support local farm operations rather than allowing them to be run out by the few large farming corporations that make up the world food market. They believe the solution to high food prices and world starvation is for each country to have "food supremacy" and not depend on imports. Many other solutions simply call for countries to use less food for themselves and donate money to poorer countries to help the government feed their citizens.

Food prices are affecting the entire world economy and people in every country. In order to eliminate some of the causes working together to rise food prices countries will have to work together to stop them. Perhaps in the future, competing governments will cooperate in recognition of the common goal to bring the world food market under control.