Global food demand causes prices to grow

The Baltimore Sun

LAWTON, N.D. -- Whatever Dennis Miller decides to plant this year on his 2,760-acre farm, the world needs. Wheat prices have doubled in the past six months. Corn is on a tear. Barley, sunflower seeds, canola and soybeans are all up sharply.

But the prices that have renewed Miller's faith in farming are causing pain far and wide. A tailor in Lagos, Nigeria, named Abel Ojuku said recently that he had been forced to cut back on the bread he and his family love.

Everywhere, the cost of food is up sharply. Whether the world is in for a long period of continued increases has become one of the most urgent issues in economics. Many factors are contributing to the rise, but the biggest is runaway demand. In recent years, the world's developing countries have been growing at about 7 percent a year, an unusually rapid rate by historical standards.

The high growth rate means hundreds of millions of people are, for the first time, getting access to the basics of life, including a better diet. That jump in demand is helping to drive up the prices of agricultural commodities.

Farmers all over the world are producing flat-out. American agricultural exports are expected to increase 23 percent this year to $101 billion, a record. The world's grain stockpiles have fallen to the lowest levels in decades.

"Everyone wants to eat like an American on this globe," said Daniel W. Basse of the AgResource Co., a Chicago consultancy. "But if they do, we're going to need another two or three globes to grow it all."

In contrast with a run-up in the 1990s, investors this time are betting that scarcity and high prices will last for years.

If that comes to pass, it is likely to present big problems in managing the American economy. Rising food prices in the United States are already helping to fuel inflation reminiscent of the 1970s. And the increases could become an even bigger problem overseas. The increases that have already occurred are depriving poor people of food, setting off social unrest and even spurring riots in some countries.

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