Focus of The 2011 GHI: Rising and Volatile Food Prices
The report cites 3 factors as the main reasons for high volatility, or price changes, and price spikes of food:
- Use of the so-called biofuels, promoted by high oil prices, subsidies in the United States (over one third of the corn harvest of 2009 and 2010 respectively) and quota for biofuel in gasoline in the European Union, India and others.
- Extreme weather events as a result of Climate Change
- Future trading of agricultural commodities, for instance investments in fonds, which are speculating on price changes of agricultural products (2003: 13 Bn US Dollar, 2008: 260 Bn US Dollar), as well as increasing trade volume of these goods.
Volatility and prices increases are worsened according to the report by the concentration of staple foods in a few countries and export restrictions of these goods, the historical low of worldwide cereal reserves and the lack of timely information on food products, reserves and price developments. Especially this lack of information can lead to overreactions in the markets. Moreover, seasonal limitations on production possibilities, limited land for agricultural production, limited access to fertilizers and water, as well as the increasing demand resulting from population growth, puts pressure on food prices.
According to the Global Hunger Index 2011 price trends show especially harsh consequences for poor and under-nourished people, because they are not capable to react to price spikes and price changes. Reactions, following these developments, can include: reduced calorie intake, no longer sending children to school, riskier income generation such as prostitution, criminality, or searching landfills, and sending away household members, who cannot be fed anymore. In addition, the report sees an alltime high in the instability and unpredictability of food prices, which after decades of slight decrease, increasingly show price spikes (strong and short-term increase).
At a national level, especially food importing countries (those with a negative food trade balance, are affected by the changing prices.
Read more about this topic: Global Hunger Index
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