Wealth, Not Scarcity, Was the Cause of High Food Prices

We got through a scare about food scarcity last year--prices soared. Some foodies thought it was a sign of impending disaster, as the industrialized agriculture system was starting to totter. Now things have changed and people have looked at data.

From Farm Policy:

“‘The report indicated world demand is going to be anemic this year,’ leading to more supplies than analysts expected, said Don Roose, president of U.S. Commodities Inc. in West Des Moines, Iowa. ‘It’s a very fragile world economy.’”

"In part, the Farm Foundation report stated that, “In 2008, Farm Foundation commissioned three Purdue University economists to write the report, What’s Driving Food Prices? Released in July 2008, the report had two purposes: to review recent studies on the world food crisis, and to identify the primary drivers of food prices. The economists, Phil Abbott, Chris Hurt and Wally Tyner, identified three major drivers of food prices: world agricultural commodity consumption growth exceeding production growth, leading to very low commodity inventories; the low value of the U.S. dollar; and the new linkage of energy and agricultural markets. Each was a primary contributor to tightening world grain and oilseeds stocks."

What it says to me is that last year the world (outside our borders) was wealthy, had money to spend, and spent it on food, driving up prices. That's what "consumption growth" means to me. The "low value of the U.S. dollar" simply says the world got richer vis a vis us.

This year the world is poorer and we are richer (those of us who are employed or living off Uncle via a pension).