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The true cost of rising food prices

This article is over 16 years, 4 months old
Across the world multinationals’ profits and the biofuels industry are hiking up the price of basic foodstuffs. This inflation is hitting the poorest hard, writes Carlo Morelli
Issue 2072

Have you noticed the rise in prices for food in the shops recently?

Haven’t we been told for years that our food was cheap? Not any more – since the middle of 2006 food prices have been rising rapidly.

In the last half of 2006 food prices rose faster than any other commodity group after housing.

In Britain the price of a loaf of bread has risen by 15 percent in just 12 months. According to the research company TNS Worldpanel, in the 12 months to June of this year, the supermarket price of milk has gone up 11 percent, eggs have gone up almost 18 percent, butter has gone up 5 percent and meat 6 percent.

Global prices have been rising consistently over the last year across a wide range of commodity groups, including rice, wheat, soybean, palm oil and dried milk to name but a few.

Average wheat prices have almost doubled in a year, causing misery for many across the world who rely on wheat as a cheap source of food.

For half a century household expenditure on food was falling as a proportion of total expenditure.

This is now changing – food prices are rising faster than incomes and this is set to continue. So what is going on?

World food prices are rising rapidly as a result of two interlinked factors. First, more and more land is being taken out of food cultivation as land is turned over to crops used for industrial production.

So land previously used for growing food crops is being converted into growing crops for the expanding market for biofuels.

Biofuels are promoted by many companies and governments as the green alternative to fossil fuels. Yet environmental campaigners are increasingly critical of the ecological and human damage caused by the massive increase in biofuel production.


The biofuel industry is expanding at a phenomenal rate while the world’s wheat stockpiles are forecast to drop to their lowest levels in 30 years.

John Vidal reported in the Guardian last month that some 1.4 billion acres of land in India, Brazil, Southern Africa, Indonesia and Malaysia is proposed for turning over to crops for the biofuel industry.

This race to convert land from food production into fuel production is yet another example of the logic of rampant capitalism. The capitalists invest wherever the greatest profit is to be made – irrespective of the consequences.

The second factor leading to rising food prices is the dominant control over the food industry by big business in the West.

While the poorest countries in the world have the highest proportion of national output going to agricultural exports, it is countries in the developed world which export the most agricultural products by value.

So those who are benefiting from price rises are not poor farmers in the developing world but the manufacturers and retailers in the developed world.

They have ensured that rising food prices aid their profitability.

In the case of Wal-Mart, the world’s biggest retailer, turnover increased 12 percent last year while Britain’s biggest food retailer Tesco saw its turnover increase 19 percent.

Not only do they dominate food markets, they co-operate to ensure their dominance continues.

So in 2005 Tesco agreed to swap its stores in Taiwan with the French retailer Carrefour in return for Carrefour’s stores in eastern Europe. And only last week the major retailers in Britain were accused of fixing the prices of dairy products by the Office of Fair Trading.

These changes will have a profound impact not simply on consumers in the developed world but also on the poorest people in the developing world.

The US Food And Agriculture Organisation recently stated that water scarcity already affects every continent.

By 2025, it is feared that 1.8 billion people will be living in countries or regions with absolute water scarcity, and two-thirds of the world’s population could be living under water-stressed conditions.

Agriculture consumes about 70 percent of all fresh water drawn worldwide and up to 95 percent in many developing countries.

So the shift to industrial production of crops for fuel rather than food will not only have an enormous impact on the availability of food to eat but will also create still greater pressure on water availability.


The result will be hunger, starvation and water shortages for people – even while they are surrounded by an abundance of crops that they cannot eat or water they cannot drink.

While capitalism doesn’t have any answers to these problems, the world’s poor certainly do. Rising food prices have sparked repeated protests around the world.

This year has seen protests against multinational tea companies in India, against Nestle’s union busting in Pakistan and Wal-Mart’s in China, protests against food price rises in Mexico.

These movements among many of the poorest groups in the developing world highlight the conflicts taking place within the world food sector.

They demonstrate that the firms that dominate the world’s food industry are not all powerful and the direction of the world agriculture is not uncontested.

Furthermore, they have the potential to unite the world’s working classes into a challenge to capitalism’s destruction of the environment and into a fight for the right to affordable food.

Carlo Morelli is a lecturer in business and economic history at Dundee university

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