Friday, November 11, 2011

Cheap Food: Bad Expensive Food: Terrible

From Global Dashboard:

It’s interesting to look back a few years – to when the world was worried that food was too cheap, not too expensive.
In 2004, the UN Food and Agricultural Organization looked back on a long bear market for food: forty years in which real prices of agricultural commodities had fallen 2% per year, or 50% between 1961 and 2002.
Innovation had driven up yields and productivity; growing numbers of suppliers had flooded onto global markets; and subsidies were keeping production levels artificially high. It was good news for consumers, but bad news for farmers and for poorer countries reliant on food exports, where low prices had “battered income, investment and employment.”
In his introduction to the State of Agricultural Commodity Markets 2004, the FAO’s director general, Jacques Diouf, delivered a homily on the chronic oversupply of food. Prices in the mid-1990s were lower than at any time since the Great Depression, he complained, eroding the viability of rural communities and fuelling migration to cities.
There were winners and losers of course, but more of the latter than the former:
The main beneficiaries of lower food prices have been consumers in developed countries and in urban areas of developing countries.
However, for the vast majority of the world’s poor and hungry people who live in rural areas of developing countries and depend on agriculture, losses in income and employment caused by declines in the prices of the products they market generally outweigh the benefits of lower food prices when commodity prices fall.
FAO wanted the problem of oversupply fixed. It called for rich countries to cut subsidies and take land out of production. Poor countries needed to stimulate demand for food, it said, and equip their farmers to export cash crops – preferably processed ones – to the West....MORE
HT: Roger Pielke Jr. who writes:
What is the Goldilocks Price for Food?

Over at Global Dashboard, David Steven asks a serious question by juxtapositioning FAO's views when food was cheap (a bad situation as it dampened income, innovation and employment) versus its views when food became more expensive (also a bad situation as it forces millions into chronic hunger).

Is there a "Goldilocks"  price for food?  If not should innovation policy and food supply for those in the greatest poverty be to some degree counter-cyclical?  Keynesian food policies, anyone?