Food Prices Essay Example | Topics and Well Written Essays - 1000 words

Food Prices - Essay ExampleThere are galore(postnominal) reasons for this sharp augment in the prices of food especially and a valid economic justification may not be provided to accurately outline the factors lowlife the increase in the food prices.Development of option fuel i.e. bio-diesel, low crop yields due to bad hold in major commodity producing countries as well as the higher demand from developed as well as emerging countries, all resulted into food inflation. Besides, the recession in US economy, wholeness of the largest importers of commodities, is likewise cited as one of the major reasons behind the sharp increase in the food prices as there has been substantial crises organism faced by US economy over the period of almost two historic period.The increase in food prices can be traced back to last two years as FAO food Index rose by 9% in 2006 and 23% in 2007. (IFAD, 2008). This sharp increase suggests that there is a great increase in the prices of food items al l over the world and many important factors are at play which is pushing the prices up. In order to make an economic analysis of this increase, we will outline and discuss different factors causing the prices to go up. (The World Bank, 2008)There is a general increase in the concern being shown over the impact of greenhouse gases over the environment of the world. This, coupled with depleting oil resources of the world, has forced many developed nations to look for alternative sources of energy to fulfill the time to come energy needs of the planet. Bio-diesel is one such alternative which has been advocated as the potential replacement of oil as a source of energy.However, this shift towards finding alternative sources has greatly increased the demand for the food items especially rice, sugarcane and corn -the commodities which are now heavily used in producing bio-diesel. This increase in meter demanded for rice and sugarcane especially have seen a great deal of increase due to i ncrease demand from developed countries. (Economist, 2007). It is also important to remark that increasing subsidies on ethanol in developed world have increased the overall demand for sugarcane because its now being used for producing ethanol rather than sugar. (Buntrock, 2007) It is also important to note that due to greater demand from developed world, developing countries, which are considered as the suppliers of basic food items in world-wide market, started to export most of their produce resulting in strong shortage of the food commodities in their own countries. This shortage of essential food commodities, in developing countries, also put strong pressure on the prices to rise upward.Reduced OutputAccording to IFAD, the available stocks of the cereals at the start of the year were very low. This, coupled with the decrease in the overall output level of major cereals by 6.9% in 2006, suggested a reduced supply of essential cereals in the market. (IFAD, 2008). This has bee n mainly attributed to the bad weather in major producing countries i.e. Brazil, Thailand, India etc causing acute shortage of cereals in the market therefore putting pressure on prices to go up drastically in such short span of time.Removal of Farm