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The Price of Food, And What Drives It

I note Dave Schuler over at OTB [1]this monring, talking about  the price of rice going up.

When I read this post [2] by one of the associate bloggers at Joe Gandelman’s The Moderate Voice, it piqued my interest. The post quotes briefly from this New York Times article [3] about possible unrest from the sharp rise in the price of rice that’s gone on recently:

HANOI — Rising prices and a growing fear of scarcity have prompted some of the world’s largest rice producers to announce drastic limits on the amount of rice they export.

The price of rice, a staple in the diets of nearly half the world’s population, has almost doubled on international markets in the last three months. That has pinched the budgets of millions of poor Asians and raised fears of civil unrest.

Shortages and high prices for all kinds of food have caused tensions and even violence around the world in recent months. Since January, thousands of troops have been deployed in Pakistan to guard trucks carrying wheat and flour. Protests have erupted in Indonesia over soybean shortages, and China has put price controls on cooking oil, grain, meat, milk and eggs.

Food riots have erupted in recent months in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan and Yemen. But the moves by rice-exporting nations over the last two days — meant to ensure scarce supplies will meet domestic needs — drove prices on the world market even higher this week.

Reports of the increases in prices are various. The graph on the right, gleaned from the WSJ, reports a more than 30% increase in rice futures in 2007. This article [4] reports a whopping 60% increase in the price of rice on world markets from March of 2007 to March of 2008.

What could cause such a sharp increase?

The NYT article suggests several reasons for the increase

  • Increased demand due to greater affluence in China and India
  • Reduced output by some growers due to poor weather conditions.
  • Farmers abandoning rice production for more profitable crops.
  • Reduction in acreage devoted to rice due to urbanization.

Unfortunately, the article doesn’t attempt to quantify any of these costs nor to identify which factors are more important than others.

I think that level of detail beyond the ken of most NYT readers, in any event. Or it’s writers, aparently, who say, Dave notes, that…

reports like this one from India and this one from Pakistan suggest that the cost of oil amounts to 25% or less of the cost of rice cultivation

… but say NOTHING about the cost of transporting it. Nor do they account for the costs of support items such as cost of ferilizer, and shipping THAT, which also, of course, requires oil.

But the fact is, the price of ALL food is going up, and by similar amounts, right across the board. It’s all being driven by ethenol, in the end, and that, in turn by the myth of ‘global warming’. A little logic bears this out; the Times cites a move toward more profitable crops. Think, now; Why are they more profitable? Can it be that those crops are being subsidised by a government looking to solve ‘global warming’ and an oil crisis, which itself was brought on by those pushing that myth?