Monday, October 10, 2011

UN says food price hike coming?

Volatility as a euphemism for food price hike?
Reuters reported, food prices are likely to become more volatile in coming years, increasing the risk that more poor people in import-dependent countries will go hungry, the United Nations said in an annual report on food insecurity published on Monday.

Global food price indices hit record highs in February and were a factor in the Arab Spring of unrest in north Africa and the Middle East.

Prices have since eased but the U.N. report said economic uncertainty, low cereal reserves, closer links between energy and agriculture markets and rising risks of weather shocks were likely to cause more dramatic price swings in the future.

"Food price volatility featuring high prices is likely to continue and possibly increase," the Food and Agriculture Organisation, the World Food Programme and the International Fund for Agricultural Development said in the joint report.

Blaming "Demand and Supply" for the problem
"Demand from consumers in rapidly growing economies will increase, population continues to grow, and further growth in biofuels (displacing food crops) will place additional demands on the food system."

We recall the oil price hiked from below US$40 in 2005 to a peak of US$148 in 2008 without much dramatic increase in demand. Later, evidences have shown that speculators especially banks like Goldman Sachs and hedge funds were responsible.

The underlying problem is deeper, the demand and supply theory of capitalism economy often does not capture the full picture.

The rich are playing fire
Ideally, the people need to have certain amount of surplus income to buffer against shock. It seems that when food spending is above 30% of family income, there will be a high chance that people may overthrow the government, or even the whole elite class. Nevertheless, elites will never stop plundering the people. When they realize that they are overdoing it, its often too late.

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