Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:


Several factors influence world food prices

A complex of factors underlies the current, high food prices. The effects of speculation around food crops should not be overestimated nor should the influence of biofuels on world food prices.

In time, food prices will again decline. These are some of the recent and most important conclusions in an economic analysis of the development in world food prices from experts at Wageningen University and Research Centre in the Netherlands.

Wageningen UR asked a number of experts to contribute to the national and international discussion by offering analysis from different perspectives. A first memorandum on the analysis of the recent price increases has already been presented.

Influence on price formation
The long-term trend of world food prices is declining. This is happening because, among other things, technological developments are pushing up the production per hectare and that, in turn, is pushing the prices down, researchers argue. Now and then brief peaks occur in food prices. It seems that the current wave of price surges is such a peak. The current peaks in the prices are lower than the peak in the food prices in the 1970s, which was the result of the oil crisis. Of course, the trend can change, but the expectation is that the response to the current, high prices will again cause a decline.

The effects of speculative investments in food crops should not be overestimated. On the one hand, they can lead to a quick increase in prices. However, on the other hand, if a decrease in prices starts, the same investments will lead to a quick fall in prices.

A large number of factors influence the current price development:

- Poor harvests have caused low wheat and barley yields in Australia, the Ukraine and Europe. The stores of these grains are running out, and the current barley and wheat prices are high.

- High maize yields led to a world-wide increase of the total grain harvest in 2007. Because of this, maize prices remained relatively low. Only very recently have increases in maize prices been detected.

- High energy prices lead to high costs for artificial fertilizers and fuel, among other things. Higher transport costs lead to price effects for transport over long distances.

- Argentine, Kazakhstan, India, Vietnam and Egypt have levied export taxes to protect their own food supply. This has pushed up prices on the world market.

- The production limitations for food products in the EU have pushed up prices.

- In the past, the low prices for food production were not an incentive to invest in technology that increased production.

- The demand in Europe and North America is stable, but the demand is growing in Asian countries as a result of income developments and changes in diet.

- The demand for agricultural products for the production of biofuels has a small effect:

-- Only 5 per cent of the oilseeds goes to biodiesel or directly to the transport sector;

-- 4.5 per cent of the grain production is used for ethanol.

Although this is a marginal demand, it still has an influence on the development of prices on the world market because the supply of food products on the world market is relatively small. At the same time, the increasing prices cause a decreasing demand from the biofuel sector because biofuel production is increasingly unprofitable.

Price pressure
In the opinion of the Wageningen UR experts, a number of developments will appear in response to the high prices. These developments will, most likely, cause a downward push.

- The high prices will lead to the use of agricultural land that is currently not in production. Huge potential exists particularly in Brazil and Russia. In other countries, production will be intensified, and this will lead to a decrease in prices.

- Because of the high prices, investments in R & D and technology will again become profitable.

- To dampen price instability, strategic stocks are indispensable.

- The influence of the biofuel directives on the development of world food prices is relative and depends on the technological developments around the production of biobased commodities. The investments in second generation biobased production are important because the production of second generation biobased products does not use the direct food product but the whole plant.

The development of the oil price is significant in predicting the demand from the biofuel sector. In the current price relation between oil and biofuels, biofuels are not profitable. With this price relation, the volume of the biofuel market will be limited to the commitments in the biofuel directive. With a relatively high oil price, biofuels can become competitive: the food and fuel markets will then be further integrated and the food prices will be determined, to a greater extent, by the oil price.

Unpredictable movements in food prices can still provide problems in the future. With high prices, the consequences in terms of hunger or malnutrition especially in poor areas will surface, and with low prices, the consequence for poor farmers will be large. In poorer areas of the world, the expenditure for food makes up, on average, about 50 per cent of an individual's disposable income. As such, price increases in these regions have dramatic effects. This percentage climbs to 65 per cent if the food prices rise by 30 per cent. In the wealthy lands, these effects, on the other hand, will be limited to 1 to 2 per cent of an individual's income.

Apart from this, the researchers state in their report that the hunger issue is, however, only partially attributable to the demand for biofuels and is much more attributable to bad policy and the poor performance of the markets.

Jac Niessen | alfa
Further information:

More articles from Business and Finance:

nachricht RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

nachricht The RWI/ISL-Container Throughput Index started off well in 2018
22.02.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Researchers Discover New Anti-Cancer Protein

An international team of researchers has discovered a new anti-cancer protein. The protein, called LHPP, prevents the uncontrolled proliferation of cancer cells in the liver. The researchers led by Prof. Michael N. Hall from the Biozentrum, University of Basel, report in “Nature” that LHPP can also serve as a biomarker for the diagnosis and prognosis of liver cancer.

The incidence of liver cancer, also known as hepatocellular carcinoma, is steadily increasing. In the last twenty years, the number of cases has almost doubled...

Im Focus: Researchers at Fraunhofer monitor re-entry of Chinese space station Tiangong-1

In just a few weeks from now, the Chinese space station Tiangong-1 will re-enter the Earth's atmosphere where it will to a large extent burn up. It is possible that some debris will reach the Earth's surface. Tiangong-1 is orbiting the Earth uncontrolled at a speed of approx. 29,000 km/h.Currently the prognosis relating to the time of impact currently lies within a window of several days. The scientists at Fraunhofer FHR have already been monitoring Tiangong-1 for a number of weeks with their TIRA system, one of the most powerful space observation radars in the world, with a view to supporting the German Space Situational Awareness Center and the ESA with their re-entry forecasts.

Following the loss of radio contact with Tiangong-1 in 2016 and due to the low orbital height, it is now inevitable that the Chinese space station will...

Im Focus: Alliance „OLED Licht Forum“ – Key partner for OLED lighting solutions

Fraunhofer Institute for Organic Electronics, Electron Beam and Plasma Technology FEP, provider of research and development services for OLED lighting solutions, announces the founding of the “OLED Licht Forum” and presents latest OLED design and lighting solutions during light+building, from March 18th – 23rd, 2018 in Frankfurt a.M./Germany, at booth no. F91 in Hall 4.0.

They are united in their passion for OLED (organic light emitting diodes) lighting with all of its unique facets and application possibilities. Thus experts in...

Im Focus: Mars' oceans formed early, possibly aided by massive volcanic eruptions

Oceans formed before Tharsis and evolved together, shaping climate history of Mars

A new scenario seeking to explain how Mars' putative oceans came and went over the last 4 billion years implies that the oceans formed several hundred million...

Im Focus: Tiny implants for cells are functional in vivo

For the first time, an interdisciplinary team from the University of Basel has succeeded in integrating artificial organelles into the cells of live zebrafish embryos. This innovative approach using artificial organelles as cellular implants offers new potential in treating a range of diseases, as the authors report in an article published in Nature Communications.

In the cells of higher organisms, organelles such as the nucleus or mitochondria perform a range of complex functions necessary for life. In the networks of...

All Focus news of the innovation-report >>>



Industry & Economy
Event News

Virtual reality conference comes to Reutlingen

19.03.2018 | Event News

Ultrafast Wireless and Chip Design at the DATE Conference in Dresden

16.03.2018 | Event News

International Tinnitus Conference of the Tinnitus Research Initiative in Regensburg

13.03.2018 | Event News

Latest News

Modular safety concept increases flexibility in plant conversion

22.03.2018 | Trade Fair News

New interactive map shows climate change everywhere in world

22.03.2018 | Earth Sciences

New technologies and computing power to help strengthen population data

22.03.2018 | Earth Sciences

Science & Research
Overview of more VideoLinks >>>