For
literally billions of people in the world there are not too
many things more important than food prices, and unfortunately
they have been hitting the headlines for all the wrong reasons
recently. The last few months have seen some of the biggest
spikes in the prices of many staple food stuffs in a generation
or more, not surprisingly provoking widespread anxiety and
social strife in several countries.
Of
course, the effects are felt much harder in lower income than
developed economies. Whereas on an average roughly one-third
of household income is spent on food in India, the equivalent
figure in the US is just 6%. Rice alone accounts for 10-15%
of the typical Indian's consumption basket and has more than
doubled in price on world markets over the last 12 months.
Wheat too has seen an extraordinary price explosion, as has
palm oil and even some vegetables.
By
any standards recent events represent a major shock with potentially
huge political, social and economic ramifications. For the
majority of countries in the world, the impact of the food
price shock could make the US and European credit crisis look
like a little local difficulty.Sharp
price movements in any product almost always begin for good,
solid reasons, and what has happened in agriculture is no
exception. The supply of food has, for example, been hit by
a combination of climatic change, which many argue is systematically
ruining harvests in several parts of the world, the increasing
use of corn and other products for the generation of biofuels
rather than for human consumption, and the urbanization of
what was previously agricultural land. Where rice once grew,
houses, shops and factories often now stand.
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