Rising Food Prices

Add the Times of London:

Families have been warned that the prices of basic foods will rise steeply again because of acute shortages in commodity markets.

Experts told The Times yesterday that prices of rice, wheat and vegetable oil would rise further. They also forecast that high prices and shortages — which have caused riots in developing countries such as Bangladesh and Haiti — were here to stay, and that the days of cheap produce would not return. Food-price inflation has already pushed up a typical family’s weekly shopping bill by 15 per cent in a year.

A further 15 per cent increase in the price of a standard Kingsmill loaf would push it up from £1.09 to to £1.24. Butter has gone up by 62 per cent in the past year. A similar rise would bring the price of a 250g pack to £1.52.

The price of rice, which has almost tripled in a year, rose 2 per cent on the Chicago Board of Trade yesterday as the United Nations food agency gave warning that millions faced starvation because aid agencies were unable to meet the additional financial burden.

and Reuters:

WASHINGTON (Reuters) – Already feeling the pinch from soaring wheat and flour prices, U.S. bakers are now beginning to experience some supply shortages.

Rye flour stocks have been depleted in the United States, and by June or July there will be no more U.S. rye flour to purchase, said Lee Sanders, senior vice president for government relations and public affairs at the American Bakers Association.

“Those that are purchasing it now are having to purchase it from Germany and the Netherlands, and that’s very concerning,” Sanders said.

She attributed the shortage to high demand for rye flour, which is used to make rye bread, and less acreage devoted to rye grain than in the past.

Grain prices have been soaring worldwide while stocks have been dwindling, causing riots in some poor countries.

to the rising chorus of breathless, hysterical voices complaining about food prices.

It’s not as though this were a surprise. There have been predictions for decades that rising standards of living in China, among other factors, would cause food prices to rise. That hasn’t stopped the United States, the EU, China, and practically every other country from enacting stupid counter-productive policies that make the problem worse than it otherwise might have been.

Factors in rising food prices include:

• Increased demand.
• Rising oil prices (the cost of oil accounts for something like 25% of the cost of grain production).
• Bad government policies.
• Speculation.
• Use of food crops for fuel production.

probably in about that order. Nearly every article I’ve seen or news report I’ve heard mentions the use of food for fuel production as a driver of higher food prices. While it’s undoubtedly one the factors, the notion that using corn for ethanol production is the most important factor driving up food prices (which is certainly the impression you’d get from reading the newspapers) is poppycock. If you believe otherwise, show me your numbers.

And the more idiotic, hysterical reports there are of food shortages the more important speculation becomes. Speculation takes a host of forms from countries banning exports of grain to idiots lining up at Costco to stockpile rice.

There’s almost no end to the bad government policies that influence food prices. Using food crops for fuel production is dumb but subsidizing that activity is insane, so, of course, we’ll keep right on doing it. Bans on exports are equally dumb. They’re just an inefficient attempt at influencing the market.

I simply have no words for the various policies that make it more worthwhile to sell prime farmland to be paved over to build highways, shopping malls, and housing tracts than it is to keep the land in production. The policies include Fed policy that pumped money into the housing market, the home mortgage deduction, subsidizing highway construction, fiat pricing, and food self-sufficiency policies on the part of many countries, including some of the poorest and most vulnerable to rising food prices.