Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Several factors influence world food prices

17.06.2008
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:
http://www.lei.wur.nl/NL/publicaties+en+producten/LEIpublicaties/?id=890

More articles from Business and Finance:

nachricht Microtechnology industry is hiring – positive developments of past years continue
09.04.2018 | IVAM Fachverband für Mikrotechnik

nachricht RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | 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: The “TRiC” to folding actin

Proteins must be folded correctly to fulfill their molecular functions in cells. Molecular assistants called chaperones help proteins exploit their inbuilt folding potential and reach the correct three-dimensional structure. Researchers at the Max Planck Institute of Biochemistry (MPIB) have demonstrated that actin, the most abundant protein in higher developed cells, does not have the inbuilt potential to fold and instead requires special assistance to fold into its active state. The chaperone TRiC uses a previously undescribed mechanism to perform actin folding. The study was recently published in the journal Cell.

Actin is the most abundant protein in highly developed cells and has diverse functions in processes like cell stabilization, cell division and muscle...

Im Focus: Lining up surprising behaviors of superconductor with one of the world's strongest magnets

Scientists have discovered that the electrical resistance of a copper-oxide compound depends on the magnetic field in a very unusual way -- a finding that could help direct the search for materials that can perfectly conduct electricity at room temperatur

What happens when really powerful magnets--capable of producing magnetic fields nearly two million times stronger than Earth's--are applied to materials that...

Im Focus: World record: Fastest 3-D tomographic images at BESSY II

The quality of materials often depends on the manufacturing process. In casting and welding, for example, the rate at which melts solidify and the resulting microstructure of the alloy is important. With metallic foams as well, it depends on exactly how the foaming process takes place. To understand these processes fully requires fast sensing capability. The fastest 3D tomographic images to date have now been achieved at the BESSY II X-ray source operated by the Helmholtz-Zentrum Berlin.

Dr. Francisco Garcia-Moreno and his team have designed a turntable that rotates ultra-stably about its axis at a constant rotational speed. This really depends...

Im Focus: A molecular switch may serve as new target point for cancer and diabetes therapies

If certain signaling cascades are misregulated, diseases like cancer, obesity and diabetes may occur. A mechanism recently discovered by scientists at the Leibniz- Forschungsinstitut für Molekulare Pharmakologie (FMP) in Berlin and at the University of Geneva has a crucial influence on such signaling cascades and may be an important key for the future development of therapies against these diseases. The results of the study have just been published in the prestigious scientific journal 'Molecular Cell'.

Cell growth and cell differentiation as well as the release and efficacy of hormones such as insulin depend on the presence of lipids. Lipids are small...

Im Focus: Touring IPP’s fusion devices per virtual-reality viewer

ASDEX Upgrade and Wendelstein 7-X – as if you were there / 360° view of fusion research

You seem to be standing in the plasma vessel looking around: Where otherwise plasmas with temperatures of several million degrees are being investigated, with...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

Within reach of the Universe

08.08.2018 | Event News

A journey through the history of microscopy – new exhibition opens at the MDC

27.07.2018 | Event News

2018 Work Research Conference

25.07.2018 | Event News

 
Latest News

Ph.D. student develops spinning heat shield for future spacecraft

10.08.2018 | Physics and Astronomy

Investigating global air pollution

10.08.2018 | Life Sciences

The “TRiC” to folding actin

10.08.2018 | Life Sciences

VideoLinks
Science & Research
Overview of more VideoLinks >>>