Trade News: Rising Food Prices Creates Food Insecurity

From ERS/USDA: Rising Food Prices and Declining Food Security: Evidence From Afghanistan. The composition of the Afghan diet is similar to that of populations in other developing countries. Over 80 percent of total calories come from grains, oils, and fats, with the majority of calories (54 percent) coming from wheat. On average, Afghan households spend over 60 percent of their budgets on food, making them particularly vulnerable to declines in purchasing power brought on by increases in food prices.

Food Security in the United States. In 2010, 85.5 percent of U.S. households were food secure throughout the entire year, and 14.5 percent of households were food insecure at least some time during that year.  Detailed surveys for further research in U.S. Food Security.

Also available for download: Household Food Security in the United States in 2010.

Food Spending Adjustments During Recessionary Times. During the 2007-09 recession, Americans of all income levels tightened their belts, primarily by eating out less.  Real expenditures by middle-income households fell the most for both food at home (6.4 percent) and food away from home (20.8 percent).

Food CPI and Expenditures: CPI for Food Forecasts. The Consumer Price Index (CPI) for food is probably the most widely used indicator of changes in retail food prices. ERS regularly updates food price forecasts for the short-term period. In 2011, the CPI for all food is projected to increase 3 to 4 percent.  Forecasts look at expected changes through 2012.

Why Another Food Commodity Price Spike? In 2002, world food commodity prices began increasing, reversing a 20-year downward trend. In early 2007, price increases accelerated and by June 2008, the monthly food commodity price index compiled by the International Monetary Fund was up 130 percent from January 2002.  Food prices jumped in 2010-11, the second price spike within 3 years. Longer term financial, agricultural, and demographic trends, exacerbated by short-term production shortfalls, set up conditions for the increases. By April 2011, the monthly index had risen 60 percent over the preceding 2 years.

Datamyne Editorial on the reasons underlying Food Price Increases: Food Prices: Why So High?  Long-term trends driving up food prices include global growth in population, per capita incomes (which boosts consumption of meat), and bio-fuel production coupled with declines in the US dollar and agricultural productivity. Shorter-term forces are also at work such as Mother Nature and government trade policies.  Since 2002, the four basic crops – wheat, rice, corn, and soybeans – have had bigger price swings than all food commodities as a whole. In the period between June 2010 and March 2011, the four-crop index rose 70%

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