Factors Affecting Global Food Prices

Over the next forty years, global population is expected to reach nine billion people. This increase in population, combined with expected economic growth, will cause an increase in food demanded and inevitably drain the resources we use for food production. So far, agriculture has been able to respond positively to the rising demand for crop and livestock products. However, farmers are already faced with many new challenges associated with feeding an expanding global population. Farmers must now meet strict new emissions requirements and produce more food on fewer acres while minimizing their environmental footprint. The demand for food is expected to grow substantially in the next couple decades. Some of the factors affecting an increase in food demands are population growth, rising incomes of individuals, food supply factors, and biofuels.

The last but not the least, high food prices make the situation even worse. According to FAO ' s data, the population of undernourishment increased by 75 million, which is higher than it in 2003 to 2005. The scientists analyzed it is caused by the rising food price (FAO, 2008). Additionally, in some countries in African, South American and Asia where average income is very low, to achieve the food security is almost impossible. For instance, Afghanistan is one of the most food-insecure countries. In Afghanistan, with 80% of the population living in rural place, the agricultural industry is most significant to this country. However, the households in Afghanistan still need to spend over 60 percent of their budgets on food. In 2008, it can be easily found in the chart, the wheat flour price experienced a sharp increase from 15 per kg to 45 per kg, which greatly increased the burden of the inhabitants (D’Souza, 2011). When the flour price rises, the local people will certainly spend more percentage of their incomes on wheat flour rather than some high-quality vegetables and meat. Unreasonable diet structure can directly contribute to lacking nutrition and influence their healthy. As a result, a vicious circle is created and makes the

Reports have said that the world must double its food production to feed over nine billion people by the year 2050. To do this, farmers must take an extra step to help to produce more grains and meats to feed the hungry. The United Nations Food and Agriculture Organization director-general,

When people think of oil, they think about the stuff you put in your car or what you use in food. Oil is so much more than that. Oil is fuel, gas and energy that we use and need in life. So we ask, why does the price of oil change so much and why does that price change affect the price of our food? Oil has such a large demand because we are dependent on it for so many things like transporting resources, running equipment, heating our houses, making our roads and many other things we use on an everyday basis (Westhoff).

The world is moving away from self-contained national economies toward an independent, integrated global economic system. Globalisation refers to the shift toward a more integrated and interdependent world economy (Dutta, 2012). There are two key facets of globalisation which are the globalisation of markets and the globalisation of production. The globalisation of market means that the expansion and access of businesses to all over the world to reach the needs of the customers internationally. And the globalisation of production means firms source goods and services from locations around the globe to capitalise national differences in the cost and quality of factors of production like land, labour, and capital. In which companies can lower their overall cost structure and improve the quality or functionality of their product offering. The rapid development of international economic integration and globalization has led to significant changes in hospitality industry. Therefore, it is necessary to dwell on different aspects of globalization as the process influencing the current and future developments in hospitality industry.

Food insecurity is an ongoing issue all over the world; as of 2012 1 billion people are suffering from starvation and malnutrition. (Sasson, 2012, pg.1, paragraph 1) Why has food insecurity become such a problem not just locally, but globally? Olivier de Schutter, special rapporteur of the United Nations on the right to food says, “If most poor countries are still very vulnerable it is because their food security depends too much on food imports whose process are increasingly high an volatile.” (Sasson, 2012, pg. 3, Hunger: A Global Shame, paragraph 4)

High and volatile global food prices along with rising energy prices are contributing factors to instability in economics in many countries. Some countries are turning to self-sufficiency in food and are also rebuilding their own public reserves because of fiasco of the international

Brown (1995) claims that most of the increase in demand for food is due to inflated incomes and a notably higher standard of living, as opposed to solely population growth (pg. 1). That is not to say that population is irrelevant, as there are 13 million people added to the population every year in the country (Brown, 1996, pg. 14). He also argues that there has been a shift from grain-based diets to livestock, seafood, fruit and vegetables (pg. 17). (ADD ONTO THIS)

The first approach in ending food insecurity is to increase the amount of food produced throughout the world. In an article on causes and prevention of food insecurity from Technology Times, Muhammad Zain et al. suggest that extra maize, rice, sugarcane, and wheat crops should be grown to provide food for a large population. However, the number of men, women, boys, and girls that are deprived of food at this point cannot benefit from enlarging the food production. While this is a considerable idea and can reduce the number of hungry people, the solution is long-term.

The availability of food is based on the amount and quality of the food produced. The DRC agricultural industry supports ⅔ of the population, and is split into two sectors: subsistence and commercial. Four million families rely on subsistence farming to produce manioc, corn and tubers. What’s left of commercial farmers, concentrate on producing the export orientated food, but the DRC does not have much of a commercial sector because of the war, which has deteriorated the infrastructure of the market.

Food costs have been risen more than 42% in the last 10 years and the costs of fruits and vegetables have risen during the years much more than other food products and they are expected to continue growing in the future. This can have a serious impact on the disposable income of consumers who uses significant quantities of fruits and vegetables or they may redirect the consumer to other types of food that are less healthy. (See Fig. 6 & 7).

The current global food system is highly fuel- and transport-dependent. Fuels will almost certainly become less affordable in the near and medium term, making the current, highly fuel-dependent agricultural production system less secure and food less affordable. It is therefore necessary to promote food self-sufficiency and reduce the need for fuel inputs to the food system at all levels.

Many governments in developing countries, many of which are attempting to stabilize and mobilize their economies in the hopes and prospects of growing their national economies, set price ceilings on basic food and services in order for them to be more affordable for their citizens and constituents, with the goal of fostering a generation of citizens who are well fed and healthy to take on some work and earn money. While that is a laudable goal, there are numerous unintended consequences that occur with a price ceiling and that may harshen and worsen the country 's economy.

Every day people use products without thinking about the significance of that particular product. Many people do not realize how important these products are and how much one product that is used every day affects the economic status of not only the country but the world. Wheat is used to make a large number of products which include beer and bread. The next few pages of this report will discuss how supply and demand for wheat shifts, how it affects price, and whether or not wheat is a luxury or a necessity will also be analyzed.

Food is the foundation of human live and people cannot survive without it. Food security is a vital issue facing the governments around the world. However, food shortage is becoming increasingly severe in this day and age. There are several reasons which led to the universal food shortage and they are interconnected to each other. Increasing world population, extreme weather and the wide spread use of biofuels are the main causes of worldwide shortage of food. These factors lead to food price rises rapidly.