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A Stormy Forecast for Food Prices

Author: Toni Johnson
May 20, 2011

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Crop-destroying weather in the United States and elsewhere is increasing pressure on already skyrocketing global grain prices. According to a recent report from UN Food and Agriculture Organization cereal prices are up more than 70 percent since April 2010. Cereals include some of the world's biggest staples--and the price increase has major implications for the world's poorest.

In the United States, winter-wheat crops could be forced into an early harvest (Bloomberg) because of drought. Flooding in the other parts of the country, particularly the rising Mississippi (VOA), is damaging cropland and delaying corn planting at a crucial time, with only 63 percent of corn planted by May 15 (WSJ) as opposed to 87 percent the same time last year. "If we do not get the right mix of rain and sun in the coming eight to ten weeks, then later this year we will see record price levels for the most important cereal in the world today--corn," says one U.S. commodity analyst (CNBC).

Other major global food producers, such as China and parts of Europe, also are suffering from difficult weather, particularly drought-like conditions, and come on the heels of a year of crop-destroying disasters around the world. High food prices have driven an estimated forty-four million people into poverty since last June, according the World Bank.

"Welcome to the new food economics of 2011: Prices are climbing, but the impact is not at all being felt equally," writes Earth Institute's Lester Brown in Foreign Policy. "Those who are barely hanging on to the lower rungs of the global economic ladder risk losing their grip entirely."

As in 2008 when food prices caused unrest in at least thirty countries, prices are exacerbating political unrest in the Middle East and some countries in Africa (AllAfrica). Though many experts say the world produces more than enough calories to feed everyone a healthy diet (PDF), nearly one billion people are still considered undernourished.

"As countries focus on food, they need to distinguish between three classes of problem: structural, temporary, and irrelevant," the Economist argues, citing, respectively, demand and production, weather, and commodity speculation.

But while the Economist contends speculation is largely irrelevant, other analysts argue it is a considerable part of the problem (Guardian). "In the short term (most of the past ten years) the prices of major foodstuffs have been driven unnecessarily high, with consequences for world hunger," writes one Guardian blogger of commodity trading. "In the longer term, we are at risk of locking in inefficiencies that will prevent the planet from providing for its growing population."

Some analysts also have decried the growing use of corn-based ethanol, which they argue contributes to higher prices (Forbes). Ethanol now takes up nearly 40 percent of the U.S. corn crop.

Analysts such as FAO senior economist Liliana Balbi say food price problems are largely a chronic lack of investment (RFE/RL) in policies "to increase production and productivity." A 2011 UN report also points out that food waste is a significant problem (PDF) where in poorer countries weak infrastructure, such as a lack of refrigeration and poor roads, can lead to considerable losses of food before delivery.

One Russian agrarian expert argues that developing countries should reduce production of foods intended for export to developed countries so they produce "what's needed" (Voice of Russia) for their own use.

Analysis

Noting that the world produces twice the nutritional needs of the global population, the Economist argues that if there is a food problem, "it does not look like a technical or biological one."

In Foreign Policy, MIT researchers Abhijit V. Banerjee and Esther Duflo examine the structural problems associated with hunger including whether policies focus on food quantity over improving problems such as delivery.

CFR's Laurie Garrett discusses the drivers of rising global food prices, including increasing demand for meat, biofuels, price speculation, and severe weather events in this video.

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