Friday, March 4, 2011

High Food Prices Are Here To Stay: Be Ready

Prepare your wallet. The IMF says record high food prices are here to stay as the main reasons for rising demand for food reflect structural changes in the global economy that will not be reversed. Among the reasons is something we have been warning about for a long time: Asian countries are now eating better, and there simply is not enough food.

The report was written by Thomas Helbling, an adviser for the IMF’s research department, and economist Shaun Roache. According to them, farmers will take years to expand production enough to meet demand and drive down costs.

All of a sudden, farming is now in vogue again. Surprise, surprise. Not!
People in developing countries are becoming richer and eating more meat and dairy, meaning more grain for livestock feed and land for grazing animals.

They also cite rising demand for biofuels as well as bad weather also tightened supply.

“Over time, supply growth can be expected to respond to higher prices, as it has in previous decades, easing pressure on food markets, but this will take time counted in years, rather than months,”

Bloomberg: adds that food output will have to climb by 70% by 2050 as the world population grows to 9B people.

Three-quarters of the global growth in demand for major crops in the past decade has been in emerging markets. High food costs still have the biggest impact on developing countries, where consumers spend a greater percentage of their incomes on food.

Incidentally, such is not the case in Canada, in this regard the country is a little more insulated from rising food prices.

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