From: Sophie Wenzlau, Worldwatch Institute, More from this Affiliate
Published April 12, 2013 08:59 AM

Global Food Prices Continue to Rise

As both climate change and population growth continue to increase, there is reason to believe that food commodity prices will be both higher and more volatile in the decades to come.

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Continuing a decade-long increase, global food prices rose 2.7 percent in 2012, reaching levels not seen since the 1960s and 1970s but still well below the price spike of 1974. Between 2000 and 2012, the World Bank global food price index increased 104.5 percent, at an average annual rate of 6.5 percent.

The price increases reverse a previous trend when real prices of food commodities declined at an average annual rate of 0.6 percent from 1960 to 1999, approaching historic lows. The sustained price decline can be attributed to farmers' success in keeping crop yields ahead of rising worldwide food demand. Although the global population grew by 3.8 billion or 122.9 percent between 1961 and 2010, net per capita food production increased by 49 percent over this period. Advances in crop breeding and an expansion of agricultural land drove this rise in production, as farmers cultivated an additional 434 million hectares between 1961 and 2010.

Food price volatility has increased dramatically since 2006. According to the United Nations Food and Agriculture Organization (FAO), the standard deviation—or measurement of variation from the average - for food prices between 1990 and 1999 was 7.7 index points, but it increased to 22.4 index points in the 2000—12 period.

Although food price volatility has increased in the last decade, it is not a new phenomenon. According to World Bank data, the standard deviation for food prices in 1960—99 was 11.9 index points higher than in 2000-12. Some price volatility is inherent in agricultural commodities markets, as they are strongly influenced by weather shocks. But the recent upward trend in food prices and volatility can be traced to additional factors including climate change, policies promoting the use of biofuels, rising energy and fertilizer prices, poor harvests, national export restrictions, rising global food demand, and low food stocks.

Perhaps most significant has been an increase in biofuels production in the last decade. Between 2000 and 2011, global biofuels production increased more than 500 percent, due in part to higher oil prices and the adoption of biofuel mandates in the United States and European Union (EU).

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