Food and Drink

All food prices are not created equal

Adriene Hill Apr 6, 2011
Food and Drink

All food prices are not created equal

Adriene Hill Apr 6, 2011

Bob Moon: Unless maybe you’ve been living life on the International Space Station, you’re painfully aware that food prices keep rising around the globe. Corn futures have doubled in the last year.

Here’s the thing, though: That doesn’t mean the cost of corn products is up two-fold everywhere. Food inflation differs dramatically
from country to country. But why the difference?

From the Marketplace Sustainability desk,
Adriene Hill set out to find out.

Adriene Hill: I swear it feels like every time I go shopping, the cost of my groceries inches up. And it’s not just my imagination. The U.S. expects the cost of food here to go up as much as 4 percent this year. I haven’t yet had a moment at the grocery store where the cost of chicken breast or romaine lettuce made me reconsider my dinner plans. But that’s not the case in some markets around the world. For more, we now turn to foreign news correspondents.

First, we have a report from Tinku Ray in India.

Tinku Ray: Here at the INA market in Dehli, onions are selling at double the normal price, at around a dollar a kilo. As the most common ingredient in Indian cooking, this is a good indicator of how expensive food is here.

Now reporter Brian Byrnes in Argentina.

Brian Byrnes: At this market the butchers say the prices have already risen 40 percent in 2011, severely cutting domestic consumption of Argentina’s tasty beef.

OK. That’s enough. So we’ve got: A vaguely annoyed American shopper. Frustrated vegetarians in India. Hungry carnivores in Argentina. Food price hikes in some parts of Africa, contributing to riots. What’s clear is that the cost of food is rising globally as more people, with more money, are looking to eat, well, more. But, why is the rate of inflation for food so different from country to country?

For one…

Per Pinstrup-Andersen: People in developing countries are buying primarily the raw product, the food.

Per Pinstrup-Andersen is a professor at Cornell University.

Pinstrup-Andersen: Whereas we in the United States and Europe are buying primarily what is added, the value added, after the food leaves the farm.

Think about the difference between a bowl of Corn Flakes and a handmade corn tortilla.

Pinstrup-Andersen: If you go and buy a bag of Corn Flakes, the proportion of what you pay that actually goes to the corn producer is extremely small.

You’re paying a little for corn and the rest for the person who makes the cereal, packages the cereal, sells the cereal, and prints that fancy rooster on the box. That corn tortilla, well, that just requires corn. So when the cost of corn goes up, the cost of making a tortilla will go up a lot faster than a box of Corn Flakes. But that’s not the only reason food price inflation varies so much.

Derek Headey: All countries have different exposure.

Derek Headey is with the International Food Policy Research Institute.

Headey: Some countries import food, some countries export food and other countries are basically self-sufficient in food and don’t really participate much in international markets.

So take one of the world’s largest rice importers, the Philippines. If international rice prices go up, the country basically has to import inflation. A country that grows and eats its own rice is immune to price jumps as long as it gets good weather. And, there are other big reasons food inflation is so different from country to country. Like, government policy. Fiscal stimulus plans, for example, can spur inflation, pushing up food prices.

Again, Derek Headey.

Headey: Food is one of those things that just responds very quickly because everybody has to eat.

And that’s really the rub with rising food costs. If you want to live, you’ve got to eat. And what you’ll pay for your food has a lot to do with where you are in the world.

I’m Adriene Hill for Marketplace.

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