Food prices

Food prices refer to the average price level for food across countries, regions and on a global scale.[1] Food prices have an impact on producers and consumers of food.

Example food pricing for tomatoes given in dollars per pound
FAO Food Price Index

Price levels depend on the food production process, including food marketing and food distribution. Fluctuation in food prices is determined by a number of compounding factors.[2] Geopolitical events, global demand, exchange rates,[3] government policy, diseases and crop yield, energy costs, availability of natural resources for agriculture,[4] food speculation,[5][6][7] changes in the use of soil and weather events have a direct impact on the increase or decrease of food prices.[8]

The consequences of food price fluctuation are multiple. Increases in food prices endangers food security, particularly for developing countries, and can cause social unrest.[9][10][11] Increases in food prices is related to disparities in diet quality and health,[12] particularly among vulnerable populations, such as women and children.[13]

Food prices will on average continue to rise due to a variety of reasons. Growing world population will put more pressure on the supply and demand. Climate change will increase extreme weather events, including droughts, storms and heavy rain, and overall increases in temperature will have an impact on food production.[14]

To a certain extent, adverse price trends can be counteracted by food politics.

Factors

Energy costs

Food production is a very energy-intensive process. Energy is used in the raw materials for fertilizers to powering the facilities needed to process the food. Increases in the price of energy leads to an increase in the price of food.[15][16] Oil prices also impact on the price of food.[17] Food distribution is also affected by increases in oil prices,[18] leading to increases in the price of food.

Weather events

Adverse weather events such as droughts or heavy rain can cause harvest failure. There is evidence that extreme weather events and natural disasters have an impact on increased food prices.

Global differences

The price of food has risen quite drastically since the 2007–08 world food price crisis, and has been most noticeable in developing countries while less so in the OECD countries and North America.[19][20]

Consumer prices in the rich countries are massively influenced by the power of discount stores and constitute only a small part of the entire cost of living. In particular, Western pattern diet constituents like those that are processed by fast food chains are comparatively cheap in the Western hemisphere. Profits rely primarily on quantity (see mass production), less than high-price quality. For some product classes like dairy or meat, overproduction has twisted the price relations in a way utterly unknown in underdeveloped countries ("butter mountain"). The situation for poor societies is worsened by certain free trade agreements that allow easier export of food in the "southern" direction than vice versa. A striking example can be found in tomato exports from Italy to Ghana by virtue of the Economic Partnership Agreements where the artificially cheap vegetables play a significant role in the destruction of indigenous agriculture and a corresponding further decline in the already ailing economic power.[21][22]

Monitoring

FAO has developed an "early warning tool" called the Food Price and Monitoring Analysis (FPMA).[23] After the food crisis of 2008 and 2011, FAO developed an "early warning indicator to detect abnormal growth in prices in consumer markets in the developing world".[24] The FPMA uses a variety of data sources to feed their database.[25]

Fluctuating food prices have led to some initiative in the industrialized world as well. In Canada, Dalhousie University and the University of Guelph publish Canada's Food Price Report every year, since 2010. Read by millions of people every year, the report monitors and forecasts food prices for the coming year.[26] The report was created by Canadian researchers Sylvain Charlebois and Francis Tapon.

Measurements

Numbeo

The Numbeo database "allows you to see, share and compare information about food prices worldwide and gives estimation of minimum money needed for food per person per day".[27]

FAO food price index
Food, meat, dairy, cereals, vegetable oil, and sugar price indices, deflated using the World Bank Manufactures Unit Value Index (MUV).[28] The peaks in 2008 and 2011 indicate global food crises

The FAO food price index is a measure of the monthly change in international prices of a market basket of food commodities. It consists of the average of five commodity group price indices, weighted with the average export shares of each of the groups.[29]

  1. FAO Cereal price index
  2. FAO Vegetable oil price index
  3. FAO Dairy price index
  4. FAO Meat price index
  5. FAO Sugar Price index
Yearnominal price idxdeflated price idx
1990107.2100.4
1991105.098.7
1992109.2101.1
1993105.597.1
1994110.3101.3
1995125.3105.3
1996131.1113.7
1997120.3111.3
1998108.6105.6
199993.292.6
200091.192.4
200194.6101.0
200289.696.2
200397.798.1
2004112.7105.0
2005118.0106.8
2006127.2112.7
2007161.4134.6
2008201.4155.7
2009160.3132.8
2010188.0150.7
2011229.9169.1
2012213.3158.8
2013209.8158.5
2014201.8152.0
2015164.0123.2
2016151.6112.3

World bank food price watch

The World Bank releases the quarterly Food Price Watch report which highlights trends in domestic food prices in low- and middle-income countries, and outlines the (food) policy implications of food price fluctuations.[30]

Grocery Foods Economics

It is rare for price spikes to hit all major foods in most countries at once, but food prices suffered all-time peaks in 2008 and 2011, posting a 15% and 12% deflated increase year-over-year, representing prices higher than any data collected.[31] One reason for the increase in food prices may be the increase in oil prices at the same time.[32][33]

It is rare for the spikes to hit all major foods in most countries at once. Food prices rose 4% in the United States in 2007, the highest increase since 1990, and are expected to climb as much again in 2008. As of December 2007, 37 countries faced food crises, and 20 had imposed some sort of food-price controls. In China, the price of pork jumped 58% in 2007. In the 1980s and 1990s, farm subsidies and support programs allowed major grain exporting countries to hold large surpluses which could be tapped during food shortages to keep prices down. However, new trade policies have made agricultural production much more responsive to market demands, putting global food reserves at their lowest since 1983.[34]

Food prices are rising, wealthier Asian consumers are westernizing their diets, and farmers and nations of the third world are struggling to keep up the pace. Asian nations have contributed at a more rapid growth rate in the past five years to the global fluid and powdered milk manufacturing industry. In 2008, this accounted for more than 30% of production with China accounting for more than 10% of both production and consumption in the global fruit and vegetable processing and preserving industry. The trend is similarly evident in industries such as soft drink and bottled water manufacturing, as well as global cocoa, chocolate, and sugar confectionery manufacturing, forecast to grow by 5.7% and 10.0% respectively during 2008 in response to soaring demand in Chinese and Southeast Asian markets.

Rising food prices over recent years have been linked with social unrest around the world, including rioting in Bangladesh and Mexico,[35] and the Arab Spring.[36]

In 2013, Overseas Development Institute researchers showed that rice has more than doubled in price since 2000, rising by 120% in real terms. This was as a result of shifts in trade policy and restocking by major producers. More fundamental drivers of increased prices are the higher costs of fertilizer, diesel and labor. Parts of Asia see rural wages rise with potential large benefits for the 1.3 billion (2008 estimate) of Asia's poor in reducing the poverty they face. However, this negatively impacts more vulnerable groups who don't share in the economic boom, especially in Asian and African coastal cities. The researchers said the threat means social-protection policies are needed to guard against price shocks. The research proposed that in the longer run, the rises present opportunities to export for Western African farmers with high potential for rice production to replace imports with domestic production.[37]

Most recently, global food prices have been more stable and relatively low, after a sizable increase in late 2017, they are back under 75% of the nominal value seen during the all-time high in the 2011 food crisis. In the long term, prices are expected to stabilize.[34] Farmers will grow more grain for both fuel and food and eventually bring prices down.[34] This has already occurred with wheat,[38][39] with more crops planted in the United States, Canada, and Europe in 2009. However, the Food and Agriculture Organization projects that consumers still have to deal with more expensive food until at least 2018.[34]

Impact of climate change in rising food prices

A continuing drought in South Africa[40] may - amongst other factors - have food inflation soar 11% until end of 2016 according to the South African Reserve Bank.[41]

See also

References
  1. Roser, Max; Ritchie, Hannah (2013-10-08). "Food Prices". Our World in Data.
  2. Amadeo, Kimberly. "5 Causes of High Food Prices". The Balance. Retrieved 2020-09-19.
  3. Abbott, Philip C.; Hurt, Christopher; Tyner, Wallace E., eds. (2008). What's Driving Food Prices?. Issue Report.
  4. Savary, Serge; Ficke, Andrea; Aubertot, Jean-Noël; Hollier, Clayton (2012-12-01). "Crop losses due to diseases and their implications for global food production losses and food security". Food Security. 4 (4): 519–537. doi:10.1007/s12571-012-0200-5. ISSN 1876-4525. S2CID 3335739.
  5. "Hedge funds accused of gambling with lives of the poorest as food prices soar". The Guardian. 2010-07-18. Retrieved 2020-09-19.
  6. "Food speculation". Global Justice Now. 2014-12-09. Retrieved 2020-09-19.
  7. Spratt, S. (2013). "Food price volatility and financial speculation". FAC Working Paper 47. CiteSeerX 10.1.1.304.5228.
  8. "Food Price Explained". Futures Fundamentals. Retrieved 2020-09-19.
  9. Bellemare, Marc F. (2015). "Rising Food Prices, Food Price Volatility, and Social Unrest". American Journal of Agricultural Economics. 97 (1): 1–21. doi:10.1093/ajae/aau038. hdl:10.1093/ajae/aau038. ISSN 1467-8276. S2CID 34238445.
  10. Perez, Ines. "Climate Change and Rising Food Prices Heightened Arab Spring". Scientific American. Retrieved 2020-09-19.
  11. Winecoff, Ore Koren, W. Kindred. "Food Price Spikes and Social Unrest: The Dark Side of the Fed's Crisis-Fighting". Foreign Policy. Retrieved 2020-09-19.
  12. Darmon, Nicole; Drewnowski, Adam (2015-10-01). "Contribution of food prices and diet cost to socioeconomic disparities in diet quality and health: a systematic review and analysis". Nutrition Reviews. 73 (10): 643–660. doi:10.1093/nutrit/nuv027. ISSN 0029-6643. PMC 4586446. PMID 26307238.
  13. Darnton-Hill, Ian; Cogill, Bruce (2010-01-01). "Maternal and Young Child Nutrition Adversely Affected by External Shocks Such As Increasing Global Food Prices". The Journal of Nutrition. 140 (1): 162S–169S. doi:10.3945/jn.109.111682. ISSN 0022-3166. PMID 19939995.
  14. "Climate Change: The Unseen Force Behind Rising Food Prices?". World Watch Institute. 2013. Archived from the original on 17 July 2018. Retrieved 7 June 2016.
  15. "USDA ERS - The Relationship Between Energy Prices and Food-Related Energy Use in the United States". www.ers.usda.gov. Retrieved 2020-09-19.
  16. "As the Cost of Energy Goes Up, Food Prices Follow". blogs.worldbank.org. Retrieved 2020-09-19.
  17. Canning, Patrick; Rehkamp, Sarah; Waters, Arnold; Etemadnia, Hamideh. "The Role of Fossil Fuels in the U.S. Food System and the American Diet". www.ers.usda.gov. Retrieved 2020-09-19.
  18. "How Oil Prices Affect the Price of Food". OilPrice.com. Retrieved 2020-09-19.
  19. "Consumer food-price inflation". The Economist. 19 July 2014.
  20. "FAO Global and regional consumer food inflation monitoring". FAO.
  21. Krupa, Matthias; Lobenstein, Caterina (30 December 2015). "Afrika: Ein Mann pflückt gegen Europa". Retrieved 16 June 2016 – via Die Zeit.
  22. https://www.die-gdi.de/uploads/media/Economic_Partnership_Agreements_and_Food_Security.pdf
  23. "Home | Food Price Monitoring and Analysis (FPMA) | Food and Agriculture Organization of the United Nations". www.fao.org. Retrieved 2020-09-19.
  24. "Developing a price warning indicator as an early warning tool - a compound growth approach | Food Price Monitoring and Analysis (FPMA) | Food and Agriculture Organization of the United Nations". www.fao.org. Retrieved 2020-09-19.
  25. "Data Sources | Food Price Monitoring and Analysis (FPMA) | Food and Agriculture Organization of the United Nations". www.fao.org. Retrieved 2020-09-19.
  26. "Canada's Food Price Report 2019". Dalhousie University.
  27. "Numbeo is the world's largest database about food prices worldwide". Retrieved 6 June 2016.
  28. "Annual real food price indices". Archived from the original on 1 April 2014. Retrieved 19 March 2014.
  29. "FAO Food Price Index". FAO. Retrieved 6 June 2016.
  30. "Food Price Watch". Retrieved 16 June 2016.
  31. "FAO food prices index". FAO.org. Archived from the original on 24 February 2018. Retrieved 25 Feb 2018.
  32. "The global grain bubble". Christian Science Monitor. 18 January 2008.
  33. "The World Food Crisis". The New York Times. 10 April 2008.
  34. "Food prices rising across the world", CNN. 24 March 2008
  35. "The real hunger games: How banks gamble on food prices – and the poor lose out". The Independent. Retrieved 1 April 2012.
  36. "Let them eat baklava". The Economist. 17 March 2012. ISSN 0013-0613. Retrieved 21 December 2018.
  37. "The end of cheap rice: a cause for celebration?". Overseas Development Institute. Archived from the original on 19 June 2014. Retrieved 6 March 2015.
  38. Kimball, Jack (7 August 2009). "World food prices stabilize, no drop in sight: WFP". Reuters. Retrieved 6 March 2015.
  39. "Inflation slows in Feb. as food prices stabilize". GMA News. 5 March 2010. Retrieved 6 March 2015.
  40. "SA drought persists despite May rainfall". 30 May 2016. Retrieved 16 June 2016.
  41. Thandi Skade (29 March 2016). "SA's ticking food price bomb". Destiny Man. Archived from the original on 11 July 2017. Retrieved 9 June 2016.

Literature
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