In this ever changing world, there is one constant, we all need food to live. However, a disturbing trend is taking place globally, dwindling food stores and high prices. According to USA Today, the U.N. Food & Agriculture Organization food price index has gone up nearly 40%, following a 9% increase the previous year. This is detrimental for the average person, let alone those already well below the poverty line. "We're concerned that we are facing the perfect storm for the world's hungry," said Josette Sheeran, executive director of the World Food Program. According to the Herald Tribune, Sheeran confided that poor people are being "priced out of the food market."
Several reasons lay behind this new surge in food inflation, a major one being an increase in oil prices, nearly 70% in the past year. Shipping costs are now doubled and the demand for alternative energy sources is taking its own toll on the world's food supplies.
Government mandates on biofuels is increasing the need for corn based ethanol and biodeisel supplies. Not only does this new growing demand compete with food for consumption, it has resulted in less plantings of other staples including soy and wheat. Many are skeptical of whether the ethanol business is really in the farmer's best interest. The industry is expanding at a high rate, land, fertilizer and seed prices have increased; upping corn production costs $200 from last year. The issue has begun to come full circle as the U.S. government is now looking into increasing subsidies for struggling consumers, due to inflation caused by their energy policies.
A decrease in cereal stockpiles is another causality of the emerging biofuels industry; it is now at its lowest level in over two decades. Palm oil, corn and sugar cane, key ingredients in biofuels are in very short supply. India for example has experienced such drastic cooking-oil shortages that they have reduced their import tariff five times in the last year. According to CBS News, it is estimated that 100 million tons of cereals are used in biofuel production, maize constituting for 95 million tons. The United States alone is expected to contribute a 37 percent increase in maize in the upcoming season.
Another reason behind the recent distension might be factors as described by Engel's law, formulated by German statistician Ernst Engel. The law states that as people from developing countries make more money they begin to spend less money on food; however what they do buy is more expensive. This rise in affluence also results in more people consuming meat throughout the world. This creates a higher demand for grain, whose supply is already dwindling. U.S. wheat stockpiles are at their lowest level since World War II. Prices of some varieties are at an all time high, more than $16 a bushel on the Minneapolis Grain Exchange.
As a result, global trade policies are being revitalized. Import tariffs are being decreased while export tariffs are being increased, in order to keep local stores stocked. "In some countries, the government is acting simply to feed people adequately," says Sorin Vasloban, a broker at Plantureux SAS. However, some like Mr. Laborde of the food-policy institute, believe that taxing exports would be an unwise move. It might reduce incentive for farmers to grow, a problem the world cannot afford to entertain. "Trade and trade policy are adjusting to a simple fact," says Michael Mann, the European Union's agriculture spokesman, "We used to have too much food, and now we have to little."
