Food cheap no more

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Cheap no more
The Economist
Rising incomes in Asia and ethanol subsidies in America have put an end to a long era of falling food prices
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ONE of the odder features of last weekend's vote in Venezuela was that staple foods were in short supply. Something similar happened in Russia before its parliamentary election. Governments in both oil-rich countries had imposed controls on food prices, with the usual consequences. Such controls have been surprisingly widespread—a knee-jerk response to one of the most remarkable changes that food markets, indeed any markets, have seen for years: the end of cheap food.

In early September the world price of wheat rose to over $400 a tonne, the highest ever recorded. In May it had been around $200. Though in real terms its price is far below the heights it scaled in 1974, it is still twice the average of the past 25 years. Earlier this year the price of maize (corn) exceeded $175 a tonne, again a world record. It has fallen from its peak, as has that of wheat, but at $150 a tonne is still 50% above the average for 2006.

As the price of one crop shoots up, farmers plant it to take advantage, switching land from other uses. So a rise in wheat prices has knock-on effects on other crops. Rice prices have hit records this year, although their rise has been slower. The Economist's food-price index is now at its highest since it began in 1845, having risen by one-third in the past year.
(6 December 2007)
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