Update On Rising Global Food Prices

Last month I started a series of monthly updates on the rising prices of food in international trade.  As you can see from the graph above, the trend is continuing so that it looks like we are likely to see prices as high as the previous spike.  It is important to note that these indicies do not reflect what prices consumers will pay in any particular country because that is also influenced by many other factors:

  • How much of a nation’s food is produced domestically?
  • Have reserves been acquired and stockpiled?
  • Does the government subsidize food for its citizens?
  • What commodities does the country tend to import in the largest volumes?

This trend is not an indicator of hunger.  That is a much more complex issue.

What Will This Mean

Those of us who live in major food exporting nations like the US, Canada, Australia… will see slightly higher food prices because grain prices are high. Since we spend a very small part of our income on food, it won’t be that painful.  Many European countries are major importers of wheat for bread and pasta, so they are already seeing noticeable price increases.  Europeans also import a great deal of animal feed so their meat and dairy prices will rise.  Still, these are relatively rich countries that spend a small portion of their income on food.  Most people in the rich countries will feel the pain of high oil prices much more than food.  It is poor people in highly trade-dependent countries who will actually suffer from this phenomenon.

One question is whether the current trend is another new spike like 2008 or actually a resumption of the first spike that was only postponed by the global recession.  Will the likely increase in farm production this season reverse this trend?  We really won’t know until this fall’s harvest.

I plan to post updates like this each month as the data emerges from FAO.

You are welcome to comment here or to email me at [email protected]

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  1. Steve Savage

    Montreal SEO
    I’m familiar with that passage and I really don’t think this phenomenon is something that dramatic. It is interesting that the price of wheat could double and it would only add a relatively small amount to the price of a loaf of bread. There is the cost of milling, baking, various transportation and several profit margins along the value chain. The wheat cost is a pretty small percent of the total.

  2. Marie | Green Your Apartment

    I have to admit this is a subject I do not know much about but I’m very interested in keeping up with your series. The macroeconomics of food, especially at these proportions, is such a complex matter. It stuns me that richer countries might feel the effect of high fuel prices more than high food prices! Going local really will make the difference in that way, won’t it?

  3. Steve Savage

    Thanks. This will be interesting to watch. Local is a mixed bag. Ocean shipping and trains are amazingly efficient ways to transport food. A filled semi driving even a long way can represent less fuel/lb of food than a pickup driving a few miles to a farmer’s market with a few cases of produce. On the food vs fuel question we have a lots of ways to absorb higher food prices. We can eat out less. We can buy smaller servings of meats. We can choose produce based on price rather than preference. Many commuters don’t have as much flexibility on fuel use – particularly if they are already car pooling.

  4. Nate

    Any thoughts on how the Federal Reserve’s weakening of the dollar and quantitative easing is playing into food prices? They claim that it has no effect, but it seems to me that pumping money into commodity traders and not really regulating them can lead to higher prices just because of the shear amount of money behind the trades.

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