urgently need Extract: Rising Global Food Prices In 2009, the World Bank reported that global food prices had almost doubled since 2005 and were forecast to continue to increase. The price of wheat especially had increased at an alarming rate of around 200% from 2008 to the end of 2009. The prices of maize (corn) and rice had also escalated. In November 2009, the Indian government reported that annual rise in food price was 21%, the price of pulses (lentils) had risen by over 30% and so had sugar prices. In Pakistan, food prices had also increased to a record high amidst claims of hoarding by grain processors and retailers. Usually, price changes for cereals can be attributed to short-term variations in supply caused by bad weather conditions. This was not the case for the latest price increases which were caused largely by demand side factors which included: the rising demand for meat in the fast growing economies of China and India; large quantities of grain are needed to feed chickens, pigs and cows, driving up grain prices a rise in domestic food consumption by increasingly rich families in these countries the increased demand for bio-fuels, especially in the USA and parts of Europe which has resulted in grain harvests being diverted from food processing to fuel processing factories, particularly for sugar cane and corn Supply side factors have intensified price increases and include: extreme weather conditions in 2008 and 2009, such as prolonged drought in parts of India, Australia and southern Africa and unexpected frosts in parts of China, which had resulted in poor harvests; Europe’s grain harvest was also affected by poor weather. global stockpiles of grains were at a record low level, meaning that supplies could not be released onto the market to reduce price instability. In India, the problems of small farmers have been aggravated by the government’s attempts to control prices. When domestic prices are rising, the government restricts export sales; when prices fall, farmers are paid subsidies. These actions seek to protect the interest of consumers and farmers alike. Because of uncertainty, many small sugar farmers abandoned sugar in 2008 when prices fell by 40%. In 2009 and 2010, sugar prices surged. The obvious response would be for farmers to revert to sugar in the hope that high prices will continue. 1. With reference to Extract 1, identify the factors that have contributed to rising food prices and discuss these clearly under demand side factors and supply side factors. Complement your explanation with a demand supply diagram showing how these factors have caused an increase in food prices. 2. With the help of demand and supply diagrams, explain how the increased demand for crops for biofuels have affected the market for crops for food. Complement your answer with a graph and identify the interrelationship between both markets
urgently need
Extract: Rising Global Food Prices
In 2009, the World Bank reported that global food prices had almost doubled since 2005 and were
In November 2009, the Indian government reported that annual rise in food price was 21%, the price of pulses (lentils) had risen by over 30% and so had sugar prices. In Pakistan, food prices had also increased to a record high amidst claims of hoarding by grain processors and retailers.
Usually, price changes for cereals can be attributed to short-term variations in supply caused by bad weather conditions. This was not the case for the latest price increases which were caused largely by
- the rising demand for meat in the fast growing economies of China and India; large quantities of grain are needed to feed chickens, pigs and cows, driving up grain prices
- a rise in domestic food consumption by increasingly rich families in these countries
- the increased demand for bio-fuels, especially in the USA and parts of Europe which has resulted in grain harvests being diverted from food processing to fuel processing factories, particularly for sugar cane and corn
Supply side factors have intensified price increases and include:
- extreme weather conditions in 2008 and 2009, such as prolonged drought in parts of India, Australia and southern Africa and unexpected frosts in parts of China, which had resulted in poor harvests; Europe’s grain harvest was also affected by poor weather.
- global stockpiles of grains were at a record low level, meaning that supplies could not be released onto the market to reduce price instability.
In India, the problems of small farmers have been aggravated by the government’s attempts to control prices. When domestic prices are rising, the government restricts export sales; when prices fall, farmers are paid subsidies. These actions seek to protect the interest of consumers and farmers alike. Because of uncertainty, many small sugar farmers abandoned sugar in 2008 when prices fell by 40%. In 2009 and 2010, sugar prices surged. The obvious response would be for farmers to revert to sugar in the hope that high prices will continue.
1. With reference to Extract 1, identify the factors that have contributed to rising food prices and discuss these clearly under demand side factors and supply side factors. Complement your explanation with a demand supply diagram showing how these factors have caused an increase in food prices.
2. With the help of demand and supply diagrams, explain how the increased demand for crops for biofuels have affected the market for crops for food. Complement your answer with a graph and identify the interrelationship between both markets
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