Eating up the prices

Up, up and out of reach

Food prices are high and getting higher. Some of this can be blamed on the alternate use of crops for biofuel, and some due to the shifting of production towards more biofuel friendly crops. Whether this is a good thing or not would need more discussion than I can give it here. Suffice it to say that there are credible studies suggesting that biofuels may require more energy to produce than that which they eventually provide. Knee-jerk green policies and subsidies in some countries by-pass the free markets ability to make sense of complex information. We’re probably shooting ourselves in the feet.

But the increase in food prices go beyond this.

Blame it on the fuel

Perhaps another element is that as fuel prices increase, so the cost of food production (everything from land preparation, crop monitoring, harvesting, transport, processing and packaging) has increased. With oil spiking 9% to $139 on Friday, and up massively over the last few years (I don’t have exact figures on hand) this clearly has contributed.

But what about consumption?

Consumption patterns in BRIC

As China and India (and Brazil and Russia to some extent, collectively the BRIC countries) increase their standards  of living and consumption of consumer goods and durables, what is happening to their daily kilojoule consumption? The widely publicised obesity problem in the US (and I understand starting in the UK already) is partly a function of , but also a function of affordability and prosperity.

So are developing nations consuming more food than they were previously? Sounds undeniable. How was international food production kept pace? Ok, here is where I admit I don’t know.

Chart of world obesity levels from Nationmaster

The chart above shows the inequality in the spread of obesity – First and Second largest world economies at top and bottom. Perhaps culture does have more to with this that pure per capita income does.

Obesity in developing countries

The scary thing about these articles? They’re from before the current millenium. As at 1999, developing countries were consuming on average about a third less than their US counterparts. Compound that with increasing populations, and it’s a food timebomb.

Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.

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