The Economics of World Hunger

Saturday, June 07, 2008 by: Jo Hartley
Tags: food shortage, health news, Natural News

(NewsTarget) Food has become the new gold. Investors weary of the real-estate bubble-burst have poured millions of dollars into grain futures. This has succeeded in driving up prices even more. Now we are witnessing a global panic as nations are waging a run on our wheat harvest.

Foreign investors have begun to stockpile wheat by placing orders on U.S. grain exchanges that are two or three times larger than normal. This has led U.S. mills to place large orders in the fear that there would soon be no wheat left at all.

Asian countries have placed huge orders with little concern over how high the prices are going. Grain prices are currently rising more in one day than they have in entire years. Regardless of the price the grain is selling. People need to eat.

Food prices are causing upset worldwide. We are seeing an unprecedented wave of hunger rolling through the poorest nations of the world. Between early 2005 and early 2008 prices rose 80 percent according to the United Nations' Food and Agriculture Organization. So far, most of the increase is being absorbed by distributors and processors but consumers are feeling the pinch as well.

The world's food supply and demand has grown into a situation of civil turmoil. After violent riots in Port-au-Prince, Haitian Prime Minister Jacques-Édouard Alexis was forced to step down recently. At least 14 countries have had food-related violence occur recently.

To control the unrest, some countries are digging deep to increase food subsidies. The U.N. World Food Program has issued warnings of an alarming surge in hunger in areas such as North Korea and West Africa. Wheat has now begun to moderate slightly as farmers rush to plant more wheat now that profits are rising.

Analysts predict that prices may come down possibly 30 percent in the next few months. Even so, this would still leave prices up 45 percent. Prices are not expected to go back down to where they were in early 2006 so this means that the world must accept the reality of more expensive food.

Countries that have driven up the food demand are now dealing with the cost of their own success -- rising prices.

China is trying to reassure its people by announcing reserve grain holdings of 30 to 40 percent of annual production, but fears persist. There are widespread reports of grain hoarding. In India, the government recently restricted all import duties on cooking oils and banned exports of non-basmati rice. The impact in India is being felt the most among the poor.

Even in Japan, a country with a distinct aversion to genetically modified grains; manufacturers are taking a risk by importing them for use in processed foods for the first time. Inflation in the EU hit 3.6 percent in March, the highest rate since the euro was adopted almost ten years ago. Food and oil prices are mostly to blame.

Back in the U.S., consumers are reducing quality and increasing quantity if something can be purchased at a better unit price.

The root cause of price surges varies from crop to crop, but the crisis is being fueled largely by an unprecedented linkage of the food chain. A big reason for higher wheat prices is the drought in Australia.

Wheat prices are also rising because U.S. farmers have been planting less or moving their wheat to less fertile ground. This is due to the fact that they are planting more corn for biofuels. At least a fifth and possibly as much as a quarter of the U.S. 2008 corn crop will be allocated for ethanol. As food and fuel combine, it has given American farmers a huge opportunity for large profits after years of stable prices.

The global food trade never became the kind of well-organized process that made the price of manufactured goods such as electronics uniform around the world. Where food has been concerned, subsidies designed to protect farmers have distorted the real price of food globally and prevented the market from normal price adjustments as global demand has risen.

If market forces had played a larger role in food trade perhaps the world would have had more time to adjust to the gradually rising prices. As it stands now, higher food prices are here to stay.

About the author

Jo Hartley
Wife, Mother of 8, and Grandmother of 2
Jo is a 41 year old home educator who has always gravitated toward a natural approach to life. She enjoys learning as much as possible about just about anything!
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