So I gather world food prices are on the rise, particularly in grains and corn. Says Statistics Canada:
Does someone who knows more about the way the world food/grain market works have an explanation why this is happening? Is it part of a broader trend, or an anomaly in 2007? Was there a major drought/typhoon/something that affected world production?
Higher fuel costs mean it’s more expensive to process and transport?
Transit costs, mostly, due to rising fuel costs. Fuel costs also have an impact on farm operating costs. Grains are fairly stable agricultural products; a tendency to ship them long distances, because they’ll stand it, has developed. Even though grains tend to travel on commodity barges and other cheap, slow vehicles, the price per distance cost increases add up, and are attached to the price of the final product. As to a full understanding of why Canada is insulated…dunno.
More expensive to grow and fertilise as well as process and transport. All those petro-powered farm machines don’t move by themselves. Plus, commercial fertiliser is mostly made from natural gas, which is also increasing in price.
Composting is looking more and more cost-effective.
(I was wondering why I hadn’t noticed the price rises that people have been mentioning. We’ve been lucky in Canada. Dunno whether that will last, though.)
Transportation costs are only part of it. Large-scale grain production requires petroleum based fertilizers.
Demand for production of biofuel, especially ethanol.
I think it has to do with the strong Canadian currency – it rose significantly against that of Canada’s main trading partner, the United States. As well, Canada has very significant domestic production of grains, domestic production and refining of fuels used to transport them and some government subsidized distribution (in the form of government-owned grain railcar pools), and a certain degree of price management.
But I’m more interested in knowing why and how world food prices are rising. If it’s rising fuel costs, that’s only likely to get worse in the long run, I’d think, and poses implications for the way the world food supply is managed and distributed.
I have also heard it claimed that rising food prices are in part due to increased demand from developing countries, primarily India and China. The immense populations there are consuming more grain and other staple foods, driving up prices.
Here is a story that discusses many of the reasons for rising prices:
Also the general rise of the standard of living in traditionally poorer countries is driving up demand. Most notably it is in China and India where this increase in demand is taking place. However, it isn’t so much in a demand for grains, but a demand for more meat. Don’t forget that it takes so many kg of grain to produce one kg of meat. Therefore, with millions of people/families in China and India having a little more income and desiring a little more meat on their tables…
The December 8th, 2007, issue of the Economist dealt with the global rise in food prices. An interesting read. If you can get your hands on a copy it’d answer all your questions.
It does mention that the situation (of rising food prices) could be much worse (and will get that way). You ask about droughts or nature affecting food production. The Economist article says that the previous few years have been some of the most productive ever. Nevertheless, demand continued to outstrip supply, and as a result global food reserves have actually been declining. Therefore, if a severe natural disease destroyed say Canada’s grain crop this year, it would have serious repercussions on the global food supply.
This is a big factor, especially in Europe, where subsidies for ethanol production are seriously impacting German barley prices and beer production. The ripples spread…