Sep 24, 2012

More on "Agflation" (Rising Food Prices)

What we are seeing represents the third major rally in global grain and oilseed prices in just half a decade. 
Worse is to come, new research warns. World food prices look set to hit an all-time high in the first quarter of next year – and then keep rising, according to the analysis from Rabobank, a specialist in agricultural commodities. 
By June 2013, the basket of food prices tracked by the United Nations could climb 15pc from current levels, according to the bank's analysts. 
"The coming year will see the world economy re-enter a period of agflation as grain and oilseed stocks decline to critically low levels, pushing the FAO [Food and Agricultural Organisation] Food Price Index above record nominal highs set in February 2011," they say. 
. . . 
"Politics and economics are inextricably linked as exemplified by the Arab Spring, which was preceded by a rise in food prices," note Hermes fund managers in a recent report. 
But no crisis looks quite the same as the last. Rabobank thinks the consumer impact could be less painful this time around compared to 2008, when there were severe shortages of wheat and rice.
And more:
More specifically, the scarcity of feed crops is expected to have major repercussions for the meat and dairy industries, as the increase in the costs of feed stocks raises the prices faced by consumers and hits profit margins.
Previous posts on the same topic are here, here, and here. Here there is an critic of Tyler Cowen's NYT article. Here there is a post by Ángel Martín Oro (in Spanish). The discussion on agriculture, development, and agflation is getting increasing attention.  

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