Cost of food rising fast, driving inflation and hurting the poor

rural commodity pricesThe cost of food is rising fast. We had been expecting this because of variations in weather patterns which we feared would upset cultivation. However, the sudden interest in corn for ethanol, since the warnings last year by the Stern Review, An Inconvenient Truth and IPCC, has also contributed to an increase. The chart here shows the Reserve Bank of Australia’s index for food commodities since 1982. (Includes Wheat, Beef and veal, Wool, Cotton, Sugar, Barley, Canola, Rice.) It is now at its highest level ever, having bounced up in the past couple of months.

While we will start to feel the pinch at the basic end of our consumption spectrum and this relative scarcity of food commodities will push up inflation, it is the poor of the world that will suffer most, particularly the poor in developing countries. The first sign of this pain was the hike in corn prices in the middle of the year as agro-industrial giants and investors rushed to invest in US corn for ethanol, which meant Mexican’s staple tortilla doubled in price. Now signs of a wider pain are showing as we learn that US food aid has halved because of increasing prices: The amount of food bought for American food aid programs has fallen to 2.4 million metric tons this year from 4 million metric tons in 2005 and 5.3 million metric tons in 2000.

It is perhaps time to think more seriously of ending the food subsidies that rich countries pay their farmers. That would have the multiple benefits of moderating prices of commodities, helping feed people in poor countries and realigning resource use to a more natural and economical profile in rich countries.

(Further browsing: the UN Food and Agriculture Organisation (many divisions, lots of news and data) USDA Food sector site and an interesting site on food history.

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