Food Prices and Rural Poverty - Essay Example

FOOD PRICES By + Introduction Food prices have been sharply increasing for the past couple of years. This has caused serious concern to most states particularly the developing countries since most people might not meet their nutritional needs. The most fundamental reasons for hike in food prices are the civil unrest and inflation. In this case, the governments have to come up with ways of bringing food prices under control and in aiding poor people to cope with the rising food bills. The increasing food prices affect both the producers and the consumers1. High energy prices in AZERBAIJAN and high agricultural inputs like fertilizers prices lead to an expensive production which in turn leads to hike in food prices. Consequently, the producers’ increases food prices to the consumers so that they can manage continuous food production. This paper will discuss the impacts of increasing food prices to both the producers and consumers. Additionally, it will discuss the factors that drive the food prices high and what or for whom, the cost and benefits of such increase are. Increase in food prices may affect producers positively or negatively. High food prices may affect the demand of food negatively. When the food prices goes high, the demand may go low since consumers may decide to go for cheaper substitutes or may decide to entirely forego that kind of food. For instance, increase in soft juice prices, meat and juices reduce their consumption, since people will opt for alternative food that is cost friendly2. On the other hand, producers may benefit directly from the high prices of food since they will be making more profit. Food prices hikes due to increase in demand hence producers will be able to produce in bulk which will also earn them a lot of sales which in turn increases their profits. To the consumers higher food prices have detrimental effects since some people will be spending more money on food in such a way that they will not have money to spend on non-food items. People who are below average financially, might not afford some food if the prices are hiked hence they might opt to skip some meals which is dangerous to human health. Additionally, the chronic diseases will be in the rise since consumers cannot meet the required dietary needs3. Most people will buy food for general satisfaction without looking into the nutritional value of food. High food prices interfere with the consumer preference. If the consumers visits the market and find that the preferred food is expensive than usual, they shift their preference towards the cheaper alternative. As a result, this may end up lowering the consumer demand on some products which may lead to less supply from the producers that means the sellers will be buying less from the producers due to low demand. One of the factors that have come out strongly to drive food prices on the rise is the high prices of energy. Energy is required in the cultivation machines and in transportation4. This has led to an increase in cost of mechanical cultivation and the transportation of farm inputs and outputs. Further, increased prices of energy leads to high cost of production of inputs such as pesticides and fertilizers, this in turn hikes agricultural production cost which will result to food prices increase. Increasing food demands has lead to an increase in food prices. The world population is growing as time passes. As a result, the demand for various kinds of food becomes high. Production of biofuels is in the rise which is also increasing the demand. Additionally, rapid economic growth in most of the developing countries AZERBAIJAN being one of them has heightened the purchasing power of consumers which in turn build up food demand5. Besides, most people have drifted from the traditional staple food and have moved towards the higher value food such as milk and meat. As a result, this increases high demand for grains that are used to feed livestock hence increasing the cost of production of meat and milk. Drought has also been among the reasons for food prices skyrocket. The countries that used to produce grains in bulk such as Australia were stricken by drought hence they could no more produce grains in large amounts. As a result, the few grains that were produced were sold at high prices. The few producers who have grains take advantage of reduced supply and increased demand to hike prices of the grains. In the recent year’s drought has affected the Western part of US which has led to rise in prices of dairy, vegetables, meat and fruits. Drought has also driven up the cost of feed for livestock which in turn, increases the causes the increase in prices of meat and dairy products6. Diseases that attack livestock and plants have significantly contributed to the rise in food prices. Some diseases such as Porcine Epidemic Diarrhea Virus in pigs is fatal to young pigs and therefore, cuts on the production of ham and pork chops. As a result of low supply and increased demand, the prices of ham and pork chops go high. Additionally, fruits and vegetables are prone to diseases that may affect their production. For instance, there was a time citrus fruits suffered from citrus greening disease. This greatly reduced the production of oranges and grapefruit. Consequently, this posed a great threat to the survival of citrus industry. Biofuel production is another reason for rise of food prices through greater competition for corn and other feedstock. Biofuel are in competition with food for arable land. This causes food production to be low hence leading to the increase in food prices. This year, approximately 30% of the corn crop is expected to go to the biofuels instead of being used for food supply. Furthermore, the increased production of ethanol has also led to the increase prices because of the rising demand of corn involved in production. Increase in food prices mostly will benefit the government and the producers. The government may benefit from the hiked food prices since it might improve the economy of the country. Further, the government will benefit from increased tax collection since the high profits the producers earn the higher the taxes they pay7.This as well helps to improve a country’s economy. Besides, employment opportunities open up since increased production will need more labor. Thus, this will improve the living standards of a nation. The producers will benefit from high food prices since the demand will increase which in turn, force the producers to produce in large quantities which also gives them an opportunity to export their produce hence making them large profits. Increased food prices also benefits the energy firms, transport firms and the firms that produce inputs such as fertilizers. Institutional investors and speculators benefit a lot from the hiked food prices since they buy in bulk and stockpile for future purposes. When there are shortages of food, they sell their stock at high prices which gives them high profits. Further, corporations such as multinational agricultural biotech Biotechnology Corporation benefit a lot from the rising food prices since they increase their research on seeds and other inputs such as fertilizers hence increasing the prices of the inputs to the farmers. This results in the increment of profits in such firms8. Conclusion Food prices are in the rise since agriculture is faced with challenges such as high cost of energy, increased cost of inputs and increased cost of transport. This poses great challenges to poor people to manage their livelihoods with regard to food security. Increase in food prices is caused by the rising population which leads to increase in demand. Increase in food prices benefits mostly the speculators, the producers, the government and the dealers in agricultural in puts such as seeds, fertilizers and agricultural machineries. To curb the problem of high food prices, the government should come up with policies that regulate food prices. For instance, they should come up with trade policies that will prevent speculators from buying food in bulk so that they can sell at the time of scarcity. Further, the government should subsidize health promoting foods and hike prices on health deteriorating food so that they can encourage consumers on health feeding. 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