Economic Factors Affecting Food Prices

Study Notes

Weather and temperature affect crop growth, leading to scarcity or surplus, which impacts food prices.
Pests and diseases also affect crop growth, leading to changes in food prices.
Transportation costs, particularly oil and gas prices, influence food prices.
Labor costs, including those of farmers, packers, processors, and retailers, affect food prices.
Political and economic situations, such as conflicts, wars, economic crises, inflation, and import/export restrictions, influence food prices.

Global food prices rose 2.7% in 2012, reaching levels not seen since the 1960s and 1970s.
Between 2000 and 2012, the global food price index increased by 104.5%, at an average annual rate of 6.5%.
The FAO Food Price Index (FFPI) is a measure of the monthly change in international food prices.
The index recorded 124.0 points in 2023, 13.7% lower than the average value in 2022.

Food price volatility is influenced by weather shocks, climate change, rising energy and fertilizer prices, poor harvests, national export restrictions, rising global food demand, and increasing demands for biofuel production.
The COVID-19 pandemic has also impacted food prices, leading to disruptions in supply chains, labor shortages, and changes in consumer behavior.

Cereal prices have shown significant volatility, with prices jumping more than 80% since the early 2000s.
Meat prices have fluctuated less, with prices increasing slightly between 2012 and 2013 due to higher grain and feed prices.
Dairy prices have exhibited significant volatility, more than doubling between 2006 and 2013.

Cereal prices are expected to decline over the next decade, with the co-movement of wheat and rice prices maintaining or returning to their historic ratio.
Meat prices are expected to rebound in 2021 and 2022, reflecting higher demand following the economic recovery from the COVID-19 pandemic.
Dairy prices are expected to fall in the short-term and return to their longer-term trend as supply chain disruptions ease and marginal costs decline.

The use of food crops for biofuels has led to an increase in global food prices due to high demand for agricultural commodities.
The production of biofuels has also been associated with deforestation, leading to negative impacts on habitat, biodiversity, and climate change.

Food commodity prices have been higher and more volatile in the last decade, driven by climate change, extreme weather events, production shocks, population growth, increasing global affluence, and higher agriculture and energy costs.
High food prices tend to aggravate poverty, food insecurity, and malnutrition.