In 2011, Time magazine ran an article predicting continued food price spikes as a result of rising population, increasing fuel costs and the increasing scarcity of water.

ECO asked a researcher, Aubanie Raynal, to analyse the article five years on to see what has happened since – are food prices still on the way up?  And what will happen in the next five years?

Here are her findings:

………………….

In his 2011 article, Michael Schuman showed how limited food production coupled with
growing population drove to food price spikes.

In 2011, the economic crisis which began three years earlier in 2008, was at its highest point with prices multiplied by two since 2005.

Schumann’s list of pressures on food prices includes:

  • More and more people to feed
  • Changes in our diet – more meat consumption
  • Higher demand on biofuel
  • Higher pressure on agriculture
  • Acts of nature
  • Irrigation, lowering of the water table

Nevertheless after 2011 we observed a drop of the food price index  in 2015 with even bigger falls in 2016.

Were Schuman’s predictions wrong? What changes / factors have driven down the prices?

According to the FAO, the decrease is mainly due to large stock and lower demand. For
example, the production of wheat, sugar and palm oil is higher than expected,
and with the slow trade activity – meaning more product for less demand – the prices are
being driven down.

For Gail Tverberg, the principal cause is what she calls the “high-priced fuel syndrome”.
Indeed, every kilogram of food is produced thanks to fuel (see Figure 3 on the Finite World link). The stabilization of the barrel price predict by analysts, due to high productivity in the USA (2), Russia and Saudi Arabia and their interest to maintain it below $100 should maintain food price stability for a few years.

Furthermore, the fuel price impacts on factors other than the direct cost of
food production. For example, the demand in biofuel is currently decreasing, which implies less land area devoted for biofuel, thus more areas for food.

If we look closer at the relation between food and fuel price we realise that their evolution
might be symmetric but not proportional. Between 2011 and 2015, when the fuel price dropped  50% the food price only dropped off 30% (3).

The difference shows that other factors are playing an important role. Eastern Asian
countries, for example, are currently switching from a traditional diet to a more Western
one. A populous country as China now consumes more meat than the USA.
See: http://www.earth-policy.org/plan_b_updates/2012/update102

The food price evolution is a complex model where economic, human and environmental
parameters are linked to each other. We have to keep in mind that the 2010/2011 food
price spike was a warning and will strike again if we do not change the way we consume,
produce and regulate the food market.

In order to avoid the same scenario recurring, the solutions suggested by Michael Schuman (to increase the investment in R&D in agriculture, to control the food market and to improve food distribution) are more than ever necessary.

‘Enjoy your dinner tonight. While you can still afford it.’

 

References:
1 Editor of The Oil Drum , web article ‘High-Priced Fuel Syndrome’ Posted on September 26, 2012:
High-Priced Fuel Syndrome

2 Steve Austin, Managing editor of Oil-Price.net, web article ‘The top 6 reasons oil prices are heading lower’ Posted on May 7, 2015:

http://oil-price.net/en/articles/top-6-reasons-oil-price-are-headedlower.

3 Tim McMahon, , web article ‘Historical Oil Prices Chart’ Posted on April 30, 2015 :
http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Chart.asp
The difference shows that others factors are playing an important role. Eastern Asian
countries, for example, are currently switching from a traditional diet to a more western
one. Such a populous country as China now consumes more meat than the USA.

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