What's behind higher food prices?

Ben Collins, Dollars & Sense

Since 2003, prices of basic agricultural commodities such as corn, wheat, soybeans, and rice have skyrocketed worldwide, threatening to further impoverish hundreds of millions of the world's poor.

Shifts in fundamental supply and demand factors for food grains have undoubtedly contributed to higher food prices. Prominent among these shifts are the increasing diversion of food crops for biofuel production in the United States and Europe; sustained drought and water scarcity in Australia's wheat-growing regions; flooding in the U.S. grain belt; rising prices for oil and fertilizer worldwide; and the adoption of European and American meat-rich diets by the growing middle classes throughout Asia.

On top of these recent developments, long-term threats to worldwide agricultural output have eroded the world food system's resilience in the face of changing supply and demand. Although decades in the making, a loss of agricultural capacity worldwide caused by soil depletion, climate change, water scarcity, and urbanization has begun to take its toll on food production. Moreover, half a century of import restrictions and cheap agricultural exports by wealthy countries has devastated domestic food production capacity in poorer countries, forcing many countries that were once self-sufficient to rely on imported food from the world market.

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