The price of food commodities such as corn, wheat and rice have all increased dramatically in the last twelve months. While these trends have been positive for the U.S. farmer, they have led to dramatic consequences around the world.
According to USA Today, in the U.S. about 9% of our income goes to food with another 3% used for dining out. In emerging markets, 50% of income goes to food. This is not because the food is so expensive but because the incomes are still so low. Therefore when food prices increase dramatically, as they have in the past year, families learn to live on less. Living on less doesn't mean not eating out or reducing movies and fun activities...it means living on less food...fewer meals...something we rarely experience in the U.S.
The World Bank's Food Index soared to 29% in January, just 3% lower than its peak in 2008.
Experts attribute the increasing food shortages to the following:
• Weather related issues.
• Speculation. The futures market can cause the cost of food to rise.
• Energy Costs. The rising price of oil makes it more expensive to deliver food to the end distribution cycle, thus increasing the price.
• Trade Restrictions.
• Growing Population.
• Increasing affluence in population. This creates a greater interest in more expensive food products such as meat.
The vendor in Tunisia who set himself on fire ultimately leading to the revolution in Egypt wasn't demanding freedom...he was demanding the ability to make enough money to pay for food for his family.
A USA Today/Gallup poll found the 59% of Americans supported cutting foreign aid from the budget deficit, but it represents less than 1% of the overall budget.
Clearly the world food supply should be a critical issue to pay close attention to in the next 12 months and thereafter.