Viewpoint: Food price rises

Dr Gary Cook is a Senior Lecturer in Applied Economics at the University of Liverpool’s Management School

Food prices started to rise quite sharply for corn, soybeans and wheat at the beginning of the summer, although the rate of increase is now levelling off.

“This is the result of two factors.  Firstly, adverse weather has reduced harvests from some key producers.  Drought has affected some parts of Latin America and the mid-West of the USA, with particularly sharp effects on production of corn and soybeans.  Wheat production has been significantly reduced in the Black Sea region, which includes the Ukraine.

“Closer to home, the unusually wet summer which has significantly reduced UK harvests for wheat, fruit and vegetables , with output of potatoes and apples in particular down by about a quarter.

“However, stocks of agricultural products are also below normal levels and this has driven prices up,  partly through speculation on international commodity prices, once the news of reduced harvests came about.

“The rise in grain prices will work through into meat prices as they are important elements in feeds for livestock. These poor harvests are temporary disruptions and given generally weak economic activity globally, the outlook is for food prices to moderate over the next year.”

One thought on “Viewpoint: Food price rises

  1. Tom Barker

    Dr Cook could have mentioned a third factor; that of resource depletion, particularly oil. Since, according to the International Energy Agency, global production of oil peaked never to be repeated in 2006 (that is ‘conventional’ oil, not the ‘unconvential’ sources such as deep sea, which the energy analyst Jeff Rubin equated with ‘feeling round the back of the sofa for loose change’), the price of fuel can be expected to rise inexorably until renewable replacements are found to satisfy demand.

    The impacts of this will be profound, not least for food, which relies on mechanised production on the farm, processing, packaging and transport (frequently around the world), all of which demand lots of fossil fuels. This means that, at least in a globalised world, food is unlikely to be cheap again, particularly as bulky and low value goods will be worst hit.

    As the deficit between oil demand and oil supply increases, as it only can, this problem will increase further, probably seeing off the global economy in the process. Localised food production and supply, already increasing in popularity, is likely to replace the great global agri-economy to a large extent.

    With respect to the economy, while the externalities of economics continue to degrade the environment, and the consequent feedbacks continue to bite back at human security, there is little prospect of economic recovery in anything but the briefest interludes in a long-term series of recessions. The outlook for food prices is thus that they will continue to increase, alongside everything else.

    As Bill Clinton should have said, The economy: it’s the environment, stupid.

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