The daily global news continues to be inundated with stories of rising food prices, and accompanying rises in poverty and hunger. Recent droughts in China have been added to the list of factors driving food prices, specifically commodity prices, up around the world. Policymakers are now faced with decisions regarding the appropriate response to these increases.

The World Bank this week issued a statement saying that increasing food prices have driven an estimated 44 million people into poverty in low- and middle-income countries since June 2010. This staggering increase in global poverty levels has serious economic, social, and political implications. Many experts and media outlets worldwide have linked rising food prices to riots in Algeria, the ousting of President Zine El Abidine Ben Ali in Tunisia, and the recent riots in Egypt which led to the historic resignation of President Hosni Mubarak.

How is a country affected by changes in the world price of the commodities that it exports and imports? What is the effect on prices when a country’s food supply is increased by the release of stocks? What is driving changes in world commodity prices, and how do trends for one commodity compare with trends for another?

Durante la crisis alimentaria mundial de los años 2007 y 2008, los precios internacionales de los productos agrícolas tales como el trigo, el arroz, el maíz y la soja subieron a más del doble. Mientras que las inundaciones en Australia diezman los cultivos de trigo del país y las inclemencias climáticas en los Estados Unidos reducen las cosechas de maíz y soja, los precios de los productos básicos a nivel global se ven nuevamente afectados por aumentos drásticos.

With all the news of floods in Australia decimating the country’s wheat crop and adverse weather in the US cutting corn and soybean harvests, commodities prices across the globe are again seeing drastic increases, raising fears that we may be witnessing a return of widespread food insecurity and subsequent political and economic turmoil. Moreover, the FAO’s recent statement that global food prices reached a record high in December 2010 has sparked the memory of the crisis in 2007–08 and turned global attention back to the issue of food security.

As global food prices continue to surge, individuals and families in the developing world may be facing a new food reality. Fluctuations in the price of staple commodities may benefit some households’ welfare (producers) while hurting others (consumers). Understanding how price increases affect the developing world on a household level can pose a major challenge to global policymakers as they strive to respond to global and national food crises.

The dramatic surge in food prices in 2007–2008 seriously threatened the world’s poor, who struggle to buy food even under normal circumstances, and led to protests and riots in the developing world. The FAO’s recent statement that global food prices reached a record high in December 2010 has sparked the memory of this crisis and turned global attention back to the issue of food security.

During the 2007-2008 global food crisis, the international price of major agricultural commodities such as wheat, rice, maize, and soybeans more than doubled. As floods in Australia decimate the country’s wheat crop and adverse weather in the US cuts corn and soybean harvests, commodities prices across the globe are again seeing drastic increases. Such price spikes spark the memory of the 2007-08 crisis, raising fears that we may be witnessing a return of widespread food insecurity and subsequent political and economic turmoil.

Commodity production and trade provide the primary livelihoods for millions of households throughout the developing world. The development of this sector is essential to poverty alleviation efforts and overall economic development. However, as witnessed in recent spikes in the price of wheat and soybeans, the commodity sector is challenged by severe price volatility and high marketing costs. Many believe that commodity exchanges provide a way to mitigate these risks and increase economic efficiency in a liberalized market environment.

The global food crisis of 2007–08 was characterized by a sharp spike in the prices of most agricultural commodities, including staple grains. High world prices were transmitted to domestic markets, eroding the purchasing power of urban households and particularly the poor. In dozens of countries, high prices sparked demonstrations and riots. A number of countries, including Argentina, India, Russia, and Vietnam, responded by restricting rice and wheat exports in an attempt to keep domestic prices from rising.

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