Summary
The rapid rise in food prices
has caught the world’s attention. It has been labelled a ‘silent tsunami’
by The Economist magazine (2008) because of the series of sharp rises in
the nominal price of the world’s most consumed food commodities. In the
past 18 months, the world price of rice has tripled, maize increased by
two-thirds and wheat has doubled. Grain is a major input into meat and
diary production and these prices have also risen significantly. For example,
the price of butter from New Zealand — one of the world’s major exporters
— has more than doubled in price over the last year. Some of these price
rises are shown in charts 1 and 2. In nominal terms, the price of food
and other key commodities are at their highest level in over three decades.
In this paper the underlying
causes of these trends are analysed by examining the changes in demand
and supply in agricultural markets. The implications of these changes are
assessed, and policy solutions to ensure that food supplies are adequate,
produced at least cost and reliable, are discussed.
