The outlook on food prices

Adriene Hill Jan 15, 2011

The outlook on food prices

Adriene Hill Jan 15, 2011


Steve Chiotakis: It’s not just Tunisia where food prices are on the rise. It’s happening globally.

Let’s bring in Marketplace’s Adriene Hill from our Sustainability Desk who joins me now in studio. Good morning Adriene.

Adriene Hill: Good morning Steve.

Chiotakis: So what’s going on? Why are these food prices so high?

Hill: It’s a lot of things. Some of the major grain producers were hard-hit by weather. You remember the drought and fires in Russia? And now the floods in Australia. The USDA just cut its outlook for global grain supplies, signaling a tighter food supply. And we’re doing a lot more than just eating food, you know, we’re turning it into fuel these days — there’s more demand.

Chiotakis: And how do the food prices, Adriene, compare to the spikes a couple of years ago, back in 2008, when we saw riots in a lot of the world?

Hill: Well according to the U.N., at the end of 2010, the price of food was actually higher than its peak in 2008. Some countries are feeling the increase more than others. Here in the U.S., food prices are only up a tiny bit. But in India, for example, food prices have risen nearly 20 percent. I talked to an analyst named Maximo Torero from the International Food Policy Research Institute, and he says globally, things are mostly under control.

Maximo Torero: Right now, there is no reason to have panic. Right now there is reason be alert and to understand that this is a tight situation.

Chiotakis: Tight, but not out of control. So what’s the outlook then?

Hill: Torero thinks in the short run, with some government interventions, the price increases will be mostly manageable. But like all things market-related, it’s impossible to know for sure, and of course analysts disagree. There’s worry that price speculators are going to get involved; they’re going to see this bubble and jump on in. There’s also concern in the longer run that climate change is going to have a huge impact on food supply. Extreme weather like floods and droughts — not good for feeding all of us.

Chiotakis: And one last question for you Adriene: as the prices keep climbing, who wins? I mean, someone’s doing well, right?

Hill: There are always winners, it seems like. Cargill, for one. The U.S. company that produces food and agricultural products and trades commodities announced huge quarterly earnings this week. They actually tripled their profits. Farmers could benefit too, if these prices keep going up and they actually get the weather they need to grow their crops.

Chiotakis: Marketplace’s Adriene Hill with us from the Sustainability Desk. Adriene, thanks.

Hill: Thanks, Steve.

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