Crop prices soar, push food costs up globally

Soaring prices for farm goods, driven in part by demand for crop-based fuels, are pushing up the price of food worldwide and unleashing a new source of inflationary pressure.

The rise in food prices is already causing distress among consumers in some parts of the world – especially relatively poor nations such as India and China. If the trend gathers momentum, it could contribute to slower global growth by forcing consumers to spend less on other items or spurring central banks to fight inflation by raising interest rates.


Politicians in markets where food costs are a particularly sensitive matter are moving to counter rising prices before they take a bigger economic toll or fuel unrest. But it remains unclear whether those policies will be enough to contain the current pressures, or whether a longer-term bout of food price inflation – similar in ways to the recent climb in prices for oil and other commodities – is in the offing.

One of the chief causes of food price inflation is new demand for ethanol and biodiesel, which can be made from corn, palm oil, sugar and other crops. That demand has driven up the price of those commodities, leading to higher costs for producers of everything from beef to eggs to soft drinks. In some cases, producers are passing the costs along to consumers. Several years of global economic growth – led by China and India – is also raising food consumption, further fanning the
inflationary pressures.

Wall St. Journal