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Econo Miss

by Archives November 13, 2007

The world’s poor have always been hit the hardest when it comes to buying basic food stuffs on world markets. Environmental changes like drought or heavy rainfall and an increase in demand continues to drive up commodity prices.
The richest countries still produce more than they need or they are able to buy more to feed their populations. A portion of foodstuffs such as wheat, grain, maize, or corn are kept in stock to evade high prices in the future or lower yields due to environmental or insect damage. The global demand for grains and other commodities is increasing dramatically, due mostly from the increase in demand from the rapidly growing economies of India and China. The increasing interest in bio fuels is keeping the price of corn and sugar cane high, with the end result of trimming the use of these commodities for bio fuel and animal feed. The rapid growth of the bio fuel industry has led Jean Ziegler, an expert on food for the United Nations to call the use of food for fuel as “crimes against humanity”. Ziegler wants a five-year ban on growing crops for alternative sources of fuel, in an effort to relax market prices and feed the world’s poor.
According to the International Grains Council, global wheat inventories have fallen to their lowest since 1979. It is predicted that stocks are expected to stay tight well into 2008. The increasing price strength of agricultural commodities is riding on the backs of a weakening U.S. dollar, high U.S. export sales, increased demand, and an increase in export tax on certain crops by Argentina and Russia.
Wheat prices are not expected to drop too much as a result of Argentina’s resumption of wheat exports. Argentina stopped exporting wheat in March to provide it for their domestic market. Wheat prices will remain high partly due to the 30 per cent tax (a 10 per cent increase) added to exports. High commodity prices have allowed some countries like Argentina to achieve trade surpluses and increasing taxes on the export of these products continues to be a way for governments to make some quick cash.
Last month, Russia put price restrictions on the most basic foods like dairy products and bread. The move is supposed to ease the pressure off Russia’s poorest and most vulnerable citizens. Critics say, however, that restrictions will be lifted quickly after next month’s parliamentary elections to reflect the real prices on the markets.
The International Grains Council has reported an increase price rise on all the grains they monitor. From wheat to rice, the story is the same. Poorer countries will be hit the hardest, but we will see the effects in our grocery stores also. Industry analysts are predicting the same upward trend well into 2008.

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