If you Google the latest headlines, you will see plenty about the high price of food. Globally, however, average prices for major food commodities actually are 11% lower than a year ago, according to the latest edition of the World Bank’s quarterly Food Price Watch. Does this mean the world is out of the danger zone on high food prices? Economist José Cuesta sheds light on the issue.
Food prices have been falling globally since August 2012. Have we turned the corner on the food crisis?
It’s true we’ve seen prices declining in a sustained way, but we’re still only 18% away from that historic peak in 2012. The reasons prices increased in the first place – such as growing demand for food and weather concerns – are still issues, and probably will be in the future.I don’t think that we have turned any corner. Prices seem to be less volatile, and that’s good news. But that doesn’t mean the level of prices hasn’t continued to be high; they are still high.
Agriculture, food and nutrition
You might find it hard to believe, but high prices of onions can trigger the fall of the government in India. In 1998, a supply side shock led to a sharp increase in onion prices in the country and most notably, in the state of Delhi. In the following elections, the ruling party was routed in large part due to its failure to control the price of onions in the capital state. Today, onion prices in India are up again, rising by over 100% in just three weeks in December.
It is a matter of debate whether governments should play an active role in stimulating industrial upgrading. But it strikes me as highly unlikely that an activist role for government has much benefit for products low on the value chain. A new policy note from ODI on four product markets in five developing countries seems to bear this out.
The WSJ reports on the troubles that seasonal rains have brought to northern India. The federal government had previously bought up large quantities of local wheat and rice, and now has no place to store it, so seasonal rains are washing the rice away or causing it to rot. One New Delhi-based think tank says that the solution is simply to bring in the private sector:
Considerable effort and attention has been devoted to market-oriented reforms in the manufacturing and financial sectors and in physical infrastructure. While these are undoubtedly important sectors, there is very little by way of research on agricultural market reforms—loosely defined as deregulation of agricultural markets.