Five Reasons for Rising Food Prices
Food prices rise for various reasons. Since the beginning of the twenty-first century, food prices have increased by an average of 2.0% to 3.0% annually. Grocery food prices have risen by 2.0% while restaurant food prices have increased by 2.8%.
Reasons for Rising Food Prices
In the short term, many factors affect food prices, making them unstable. These factors include supply and demand, weather, disease outbreaks, wars, and natural disasters.
High Oil Prices
Food is transported over long distances, and shipping costs rise due to high oil prices. Fuel prices are expected to rise about six weeks after an increase in oil contracts. Oil prices also affect agriculture as oil products are an important component in fertilizers.
Climate Change
Climate change leads to extreme weather changes. Greenhouse gas emissions cause heat retention, resulting in increased air temperatures. Warm air absorbs more moisture. It rains less, water evaporates from lakes and rivers, and the land dries. When it rains, water flows off the land instead of being absorbed into the water table. This causes flooding, which in turn can damage crops.
Government Subsidies
The U.S. government subsidizes corn production for biofuel, leading to a decrease in corn supplies in the food market and rising prices. The United States now uses 37% of its corn crop to produce ethanol, up from 6% in 2000.
WTO Restrictions on Stocks
The World Trade Organization limits the amount of subsidized corn and wheat that countries can add to global stocks. The U.S., EU, and some developing countries heavily support their agricultural industries. Farmers in those countries gain an unfair trade advantage. The WTO limits stocks to reduce this advantage, but it also reduces the amount of food available in case of shortages. This increases food price volatility.
Increasing Meat Consumption
People around the world are eating more meat, especially pork, as they become wealthier. More grain is needed to feed the livestock required for meat-based diets than is necessary for grain-based diets. The increased demand for meat means an increase in grain prices. Over time, this could offset the declining demand for meat and dairy in the United States.
Current Trends
Most years witness major events that affect food prices. Some recent years that have seen such impacts include:
2020: COVID-19 Pandemic
In 2020, food prices increased by 3.3%. Most of this increase was due to a 4.4% rise in meat, fish, poultry, and egg prices. Dairy products, which rose by 3.8%, also significantly contributed to the rise.
2018 and 2019: Climate Disasters
Food prices rose by 1.6% in 2018. Hurricanes caused a temporary spike in the prices of pecans and chicken.
In 2019, food prices increased by 1.8%. The United States experienced 14 billion-dollar disasters, including three major floods, eight severe storms, two tropical storms (Dorian and Imelda), and one wildfire.
2016 and 2017: The Dollar’s Impact on Food Costs
Food prices were expected to rise by 1% to 2% in 2016. However, they only rose by 0.3%. Egg prices fell by 21.1% from their excessive levels in 2015, contributing to the lower-than-expected increase in food prices.
Food prices rose by 0.9% in 2017, coming close to the U.S. Department of Agriculture’s prediction that food prices would rise by 1%. Producers were able to export more food, which constrained supply and increased domestic prices.
Year
2015: The Impact of Bird Flu
Prices increased by an average of 1.9%. Beef and veal prices rose by 7.2%. Egg prices surged by 17.8% due to bird flu, while prices for fish and seafood fell by 0.9%.
2011-2014: How Global Food Supplies Were Affected by Disasters
In 2014, food prices increased by 2.4%. Prices for specific types of food rose due to weather conditions. For example, droughts in the Midwest caused beef prices to rise by 12.1%. The drought in California, one of the worst in history, led to increased prices for fresh fruits, vegetables, and nuts. Fresh fruit prices rose by 4.8%.
In 2013, prices increased
Source: https://www.thebalancemoney.com/why-are-food-prices-rising-causes-of-food-price-inflation-3306099
Leave a Reply