Why Did Global Food Prices Rise? Sample Essay

For the last 25 old ages planetary nutrient monetary values have been falling. driven by the increased productiveness and end product of the farm sector worldwide. In 2007. this came to an disconnected terminal as planetary nutrient monetary values soared. By September 2007. the universe monetary value of wheat rose to over $ 400 a ton-the highest of all time recorded and up from $ 200 a ton in May. The monetary value of maize ( corn ) surged to $ 175 a ton. some 60 per centum above its norm for 2006. An index of nutrient monetary values. adjusted for rising prices. which The Economist magazine has kept since 1845. hit its highest degree of all time in December 2007. One account for lifting nutrient monetary values has been increased demand. The increased demand has been driven by greater nutrient ingestion in quickly developing states. most notably China and India. Rising ingestion of meat. in peculiar. has driven up demand for grains ; it takes eight kgs of cereals to bring forth one kg of beef. so as demand for meat rises. ingestion of grains by cowss rushs. Farmers now feed 200 to250 million more dozenss of grain to their animate beings than they did 20 old ages ago. driving up grain monetary values. Then there is the issue of bio-fuel subsidies.

Both the United States and the European Union have adopted policies to increase production of ethyl alcohol and bio-diesel in order to decelerate down planetary heating ( both merchandises are argued to bring forth fewer C02 emanations. although precisely how effectual they are at making this is actively debated ) . In 2000. around 15 million dozenss of American Corn was turned into ethyl alcohol ; in 2007 the figure reached 85 million dozenss. To advance increased production. authoritiess have given subsidies to husbandmans. In the United States subsidies amount to between $ 0. 29 and $ 0. 36 per liter of ethyl alcohol. In Europe the subsidies are every bit high as $ 1 a liter. Not surprisingly. the subsidies have created an inducement for husbandmans to works more harvests that can be turned into bio-fuels ( chiefly maize and soy beans ) . This has diverted land off from production of maize and soy for nutrient. and reduced the supply of land devoted to turning harvests that don’t receive bio-fuel subsidies. such as wheat. This extremely subsidised beginning of demand seems to be holding a dramatic consequence on demand for maize and soy beans.

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In 2007. fur illustration. the U. S. addition in demand for corn-based ethyl alcohol accounted for more than half of the planetary addition in demand for maize. What is perplexing the state of affairs is that high duties are closing out manufacturers of alternate merchandises that can be turned into bio fuels. most notably sugar cane. from the U. S. and EU markets by high duties. Brazil. the world’s most efficient manufacturer of sugar cane. confronts import duties of at least 25 per centum by value in the United States and 50 per centum in the European Union. raising the monetary value of imported sugar cane and doing it uncompetitive with subsidised com and soy beans. This is unfortunate because sugar cane is widely seen as a more environmentally friendly natural stuff for bio-fuels than either maize or soy. Sugar cane uses less fertiliser than maize or soy and produces a higher output per hectare in footings of its energy content.

Ethanol is besides produced from what used to be considered a waste green goods. the fiber removed from the cane during processing. If policy shapers have their manner. nevertheless. the state of affairs may acquire even worse. Plans in both the United States and the European Union call for an addition in the production of bio-fuels. but neither political entity has agreed to cut down duty barriers on sugar cane or to take the trade falsifying subsidies given to those who produce maize and soy for bio-fuels. Brazil is non sitting on the out of boundss ; in 2007 it asked the World Trade Organization to examine U. S. subsidies to maize husbandmans for ethanol production.

Auxiliary Reading article-Rising planetary nutrient monetary values threaten to increase poorness. 2 Rising Global Food Prices Threaten to Increase Poverty by Kata Fustos
( April 2011 ) Global nutrient monetary values have been lifting. endangering to make record degrees in the approaching months if current tendencies continue. Turning universe demand due to increasing universe population and switching ingestion forms. and lower supplies partially due to bad conditions raised the World Bank’s nutrient monetary value index by 15 per centum between October 2010 and January 2011. 1 The index increased by 29 per centum overall between February 2010 and February 2011. In January. the Food Price Index of the United Nations Food and Agriculture Organization ( FAO ) was at its highest degree since tracking began in 1990. 2 While non all states are affected every bit. the recent volatility is peculiarly dismaying in parts where people spend more than half of their income on nutrient. Global Food Monetary values Surge to Record Levels. Aching the Poor in Low- and Middle-Income Countries A combination of unfavourable conditions forms around the universe and uncertainness in the quality of wheat crops in China has affected the planetary nutrient supply.

Record heat and drouth in 2010 in the former Soviet Union aggressively reduced wheat production and cover a daze to planetary wheat supplies. Extreme dry conditions in Brazil—a major nutrient exporter—contributed greatly to worldwide shortages of sugar. soya beans. and maize. Lay waste toing rain and inundations in Australia damaged wheat harvests and reduced the outputs of sugar crops. Additionally. a terrible drouth in China threatens the crop of the country’s wheat harvest and has prompted the FAO to publish a particular qui vive. qualifying the current state of affairs as “potentially a serious job. ”3 For decennaries. China has relied largely on its ain domestic grain production and was absent from the planetary grain market. However. if the drouth destroys a important part of the crop and China has to import grain to carry through domestic demand. the impact can floor the universe market and do even sharper additions in planetary monetary values. As a consequence of China’s purchasing power. it can outbid others in the planetary market. and unafraid supplies for its ain population.

An spread outing universe population. greater trust on harvests as biofuels. and switching diets continue to increase the corporate demand for nutrient. doing the spread between supply and demand even wider. Since monetary value volatility and turning demand are likely to prevail. “we demand planetary action to guarantee we do a better occupation of feeding the hungry before we face the hereafter challenges of feeding the expected 9 billion people in the universe in 2050. ” said Robert Zoellick. World Bank president. 4 Harmonizing to the World Bank index. planetary sugar monetary values reached a 30-year high in the beginning of 2011. after increasing 12 per centum since January 2010. Edible oil monetary values have risen 73 per centum since June 2010. Among grains. the monetary value of wheat has increased the most. more than duplicating between June 2010 and January 2011.

The monetary value of corn has been affected by the rush in the wheat and oil markets and besides jumped about 73 per centum during the 2nd half of 2010. Other nutrient points that contribute to dietetic diverseness. such as veggies and beans. have besides experienced big monetary value additions. Monetary values do non lift at the same rate in all states ; domestic markets are affected based on how well authoritiess are 3 able to screen their population from planetary monetary value rushs through the usage of subsidies. import revenue enhancements. and increased domestic production. Figure 1 Change in World Commodity Prices. January 2010 to January 2011 Source: World Bank. “Commodity Price Data ( Pink Sheet ) . ” accessed at

hypertext transfer protocol: //siteresources. worldbank. org/INTDAILYPROSPECTS/Resources/Pnk_0411. pdf. on April 1. 2011.

Although nutrient monetary values had been increasing for seven back-to-back months by February 2011. the monetary value of all points had non grown at the same gait ( see Figure 1 ) . Harmonizing to the World Bank’s Food Price Watch. this differentiates the current state of affairs from the monetary value rushs of 2008. when nutrient public violences broke out across the development universe. Meat monetary values have stayed comparatively stable over the past twelvemonth. Following good crops in exporting states. the planetary monetary value of rice was really lower at the terminal of 2010 than in the beginning of the twelvemonth. and it remains 70 per centum below its 2008 extremum. Therefore. rice provides a more low-cost alternate grain to the hapless and its handiness has prevented more people from droping into poorness and malnourishment. At the same clip. some Asiatic economic systems have seen crisp additions in rice monetary values. In Vietnam. Bangladesh. and Indonesia—all high rice ingestion countries—domestic rice monetary values increased over 30 per centum in the past twelvemonth. 5 Soaring nutrient monetary values disproportionately hurt the hapless in developing states.

This is particularly true in parts where people spend a bulk of their income on nutrient and rely on a specific nutrient merchandise. Although some husbandmans and nutrient manufacturers are profiting from greater net incomes. the net consequence of higher monetary values is a rise in the figure of the hapless. The World Bank estimates that an extra 44 million people have fallen into poorness in the underdeveloped universe as a consequence of higher nutrient monetary values. Overall. the figure of inveterate hungry people began to mount once more after a brief lessening to 925 million in 2010 ( see Figure 2 ) . Harmonizing 4 to Zoellick. “the tendencies towards the 1 billion are worrisome. Global nutrient monetary values are lifting to unsafe degrees and endanger 10s of 1000000s of hapless people around the universe. ”6 Figure 2 Distribution of Ill-fed Peoples in the World in 2010 ( in Millions ) Beginning: FAO Statistics Division. accessed at World Wide Web. Food and Agriculture Organization. org/economic/ess/en/ . on April 7. 2011. India Particularly Affected by High Monetary values

Food monetary values are lifting faster in India than in other big economic systems. As the country’s population continues to turn and middle category incomes rise. there is increasing force per unit area on the authorities to supply nutrient for the full state. Despite rapid economic growing over the past decennary. India still struggles to feed its population: Harmonizing to the 2005/2006 National Family Health Survey. 40 per centum of kids below the age of 3 were scraggy and 45 per centum were stunted. 7 Lack of investing has kept domestic agricultural productiveness low as manual labour remains the dominant beginning of domestic nutrient production. In 2008/2009. agribusiness employed about 52 per centum of the labour force. but merely made up 13 per centum of India’s GDP. 8 Farming and agribusiness remain greatly inefficient and unequal for feeding the country’s 1. 2 billion people. Low production and an remarkably wet summer in 2010 contributed to the current domestic nutrient rising prices that reached a 16 percent one-year rate in January 2011.

This composite figure masks the rise in the monetary value of some basics. such as onion and Allium sativum. which rose by 71 per centum during the past twelvemonth. The crisp addition is most dismaying for the 41 per centum of the population in India who live on $ 1. 25 or less a twenty-four hours and pass a bulk of their income on nutrient. as even basic points are going unaffordable. 9 The authorities is reacting to the current crisis by supplying heavy subsidies for agricultural production and by importing increasing sums of some basics. such as lentils and beans. to guarantee their handiness. It has besides put export limitations on certain merchandises to maintain them for domestic ingestion. 10 These policies can merely supply impermanent solutions. nevertheless: Long-run investing is required in agricultural research to better the quality of seeds. irrigation techniques. and overhaul other production constituents.


1. World Bank. “Food Price Watch” ( February 2011 ) . accessed at World Wide Web. worldbank. org/foodcrisis/food_price_watch_report_feb2011. hypertext markup language. on Feb. 17. 2011. 2. Food and Agriculture Organization of the United Nations ( FAO ) . “Global Food Price Monitor” ( Feb. 3. 2011 ) . accessed at World Wide Web. Food and Agriculture Organization. org/giews/english/gfpm/GFPM_02_2011. pdf. on Feb. 16. 2011. 3. FAO Global Information and Early Warning System on Food and Agriculture. “Special Alert: A Severe Winter Drought in the North China Plain May Put Wheat Production at Risk” ( Feb. 8. 2011 ) . 4. World Bank. “Food Security Fears Rise Along With Prices” ( April 2011 ) . accessed at hypertext transfer protocol: //go. worldbank. org/VCXQZNWRA0. on April 7. 2011. 5. World Bank. “Food Price Watch” and FAO. “Global Food Price Monitor. ” 6. “Food Price Hike Drives 44 Million People into Poverty. ” World Bank Press Release No: 2011/333/PREM ( Feb. 15. 2011 ) . accessed at hypertext transfer protocol: //go. worldbank. org/OFGV8BZN20. on Feb. 17. 2011. 7. National Family
Heath Survey. “Key Indexs for India” ( 2005-06 ) . accessed at World Wide Web. nfhsindia. org/pdf/India. pdf. on Feb. 16. 2011. 8. Ministry of Finance. Government of India. “Economic Survey 2010-11” ( February 2011 ) . 9. UNDP. “Multidimensional Poverty Index. ” accessed at hypertext transfer protocol: //hdr. undp. org/en/media/HDR_2010_EN_Table5_reprint. pdf. on Feb. 17. 2011. 10. Corey Flintoff. “Food Price Surge Puts Strain on India’s Poor. ” NPR ( Jan. 6. 2011 ) . 11. Renuka Mahadevan. “Productivity Growth in Indian Agribusiness: The Role of Globalization and Economic Reform” Asia-Pacific Development Journal. Vol. 10. No. 2. December 2003.


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