World food prices reached close to record levels last month, according to the UN Food and Agriculture Organization. They will probably remain high throughout the next year. Low crop production and an increase in food demand are the primary culprits, it claims.
Inflation data from China confirmed that the country is a major cause of the rise in food prices because of demand from its 1.3 billion citizens. China’s National Bureau of Statistics released a report that said June inflation in the People’s Republic was up by 6.4%, the highest rate since 2008 when the global recession began.
The core reason for the increase was a 14.4% increase in food prices compared with June 2010. Meat and poultry prices were higher by 32.2% and the price of pork was up 57.1%. Some economists blame most of these numbers on the rise in wages among Chinese workers. It is not that simple. The Organization for Economic Cooperation and Development recently said food prices worldwide could rise for another decade and might do so by as much as 30%. Obviously, that rate has already been exceeded by some meat costs in China.
China’s problem, like that throughout much of the world, is not that its population has become richer. It is that supplies of key crops produced in the largest nations by population continue to drop. The Wall Street Journal reported yesterday that “China this past week bought 540,000 metric tons of U.S. corn for delivery after August, according to the U.S. Department of Agriculture, more than the 500,000 tons the agency forecast that nation would buy in an entire year.”
It’s become clearer that food inflation worldwide has begun to rage. Crop projections show there is no end in sight. China’s inflation will be much greater than expected throughout the balance of the year. That will not be primarily because of the communist central government’s loose monetary programs, which have been blamed in the past but have now come to an end. Food shortages are the trigger.
Douglas A. McIntyre
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