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June 13, 2008
Is it all about the fuel?
The big jumps in food prices have been blamed on a number of factors, and one that stands out is higher fuel prices. But are there some other contenders that should be considered behind the higher costs at the supermarket? Listen
Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:
"Yes, there is, and I think there's one very simple one, and it's increased global use, or demand in economic lingo. If you look at all the major farm commodities - like corn, wheat, rice, barley, milk - you've seen in this decade, in the 2000s, world usage has gone way up, and inventories have gone way down. And this results in a classic motivation for price to rise. Now, the reason for the increased usage is the world is improving, the economy of many of the world's developing countries is expanding very rapidly, and people are eating better, they're eating more, and that's putting upward pressure on prices. But this has caused another factor to come into play, and that is the increased price is motivating farmers to produce more, which is what we want them to do. Many of those farms around the world, however, are small and relatively inefficient, so their costs are rising perhaps more than the rise in price, and that's adding fuel to the fire here of higher prices. So one thing that can be done is to focus not only on producing more but producing more efficiently, and in many cases, this means working with small farms to have them become more efficient producers of food."
Posted by Dave at June 13, 2008 08:00 AM