Why are food prices rising?
Prices of most agricultural food commodities have risen sharply during the past two years. Several factors have contributed to this development: (1) low levels of world stocks (especially for wheat and maize) following two years of below-average harvests in Europe in 2006 and 2007; (2) crop failures in major producing countries like Australia in 2006 and 2007; (3) rapidly growing demand for grain-based biofuel production supported by subsidies; (4) gradual changes in agricultural policies of the OECD countries, where reduced levels of subsidies have led to lower surplus production; (5) strong economic growth in developing countries and expanding world population. In addition, agricultural markets are becoming increasingly intertwined with non-agricultural markets (energy, manufacturing, finance, etc.). Climate change and resource constraints (water supply in particular) are also influencing overall food supply and demand.
