FOLLOWING A surge in food prices last summer (the fastest rate in 14 years in the UK), consumers are facing further price hikes in the coming months. In the Chicago food market, prices for wheat and rice for delivery in March 2008 hit an all-time record, soya bean prices surged to a 34-year high and corn prices hit an eleven-year peak.
Dave Carr
These rocketing prices are due to a combination of factors. Firstly, as incomes have grown amongst the middle classes in India and China, demand for meat products has grown. This in turn has increased demand for livestock feed.
Supply of food has fallen as a result of poor harvests in a number of exporting countries due to adverse weather, notably from drought-hit Australia – the world’s second largest exporter of wheat. Canada’s wheat crop also declined by 5.6% in November.
Low stocks have also pressured supply. Wheat stocks are expected to fall to 362 million metric tons in 2007-08, down from 456 million metric tons a year – the lowest harvest inventory since 1973-74.
A fourth factor has been the switching from food production to agricultural products for the bio-fuel industry. 20% of the US corn crop is used for ethanol production.
All this is bad news for low-income families. Food purchases account for around 10% of household budgets in the developed capitalist countries, but in the developing poorer countries food accounts for 65% of household budgets.
The United Nations warns that developing countries face serious social unrest as a result. Soaring food prices have already led to a spate of food price protests in Mexico, India and Italy.
But while such price inflation spells misery for millions of people, rising agricultural prices is good news for big business. US farm incomes are expected to increase by $28 billion to $87 billion this year – a 48% rise.
