A note on rising food prices - Policy research working paper

Jul 2008

This paper considers that the rapid rise in food prices between 2002 and 2008 was a burden on the poor in developing countries, who spend roughly half of their household incomes on food. It examines the factors behind the rapid increase in internationally- traded food prices and estimates the contribution of various factors such as the increased production of biofuels from food grains and oilseeds, the weak dollar, and the increase in food production costs due to higher energy prices. It concludes that the most important factor was the large increase in biofuels production in the U.S. and the EU. The author deems that without these increases, global wheat and maize stocks would not have declined appreciably, oilseed prices would not have tripled, and price increases due to other factors, such as droughts, would have been more moderate. Recent export bans and speculative activities would probably not have occurred because they were largely responses to rising prices. In his view the contribution of biofuels to the rise in food prices raised an important policy issue, since much of the increase was due to EU and U.S. government policies that provided incentives to biofuels production, and biofuels policies which subsidize production need to be reconsidered in light of their impact on food prices.
In sum, this paper examines how internationally-traded food commodities prices (maize, wheat, rice, soybeans, etc.) have changed, and analyzes the factors contributing to these increases. In particular, it looks at the contribution of biofuels production to food price increases.

By: D. Mitchell (The World Bank)

 
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