Rising Food Prices Intensify Food Insecurity in Developing Countries

Following is an excerpt from Amber Waves, a publication of the USDA.

Recent hikes in oil prices have raised serious concerns in low-income countries, both because of the financial burden of the higher energy import bill and potential constraints on imports of necessities like food and raw materials. Higher oil prices also have sparked energy security concerns worldwide, increasing the demand for biofuel production. The use of feed crops for biofuels, coupled with greater food demand spurred by high income growth in populous countries, such as China and India, has reversed the long-term path of declining price trends for several commodities.

Worldwide agricultural commodity price increases were significant during 2004-06: corn prices rose 54 percent; wheat, 34 percent; soybean oil, 71 percent; and sugar, 75 percent. But this trend accelerated in 2007, due to continued demand for biofuels and drought in major producing countries. Wheat prices have risen more than 35 percent since the 2006 harvest, while corn prices have increased nearly 28 percent. The price of soybean oil has been particularly volatile, due to high demand growth in China, the U.S., and the European Union (EU), as well as lower global stocks.

The Food and Agriculture Organization of the United Nations (FAO) estimated that the high food prices of 2006 increased the food import bill of developing countries by 10 percent over 2005 levels. For 2007, the food import bill for these countries increased at a much higher rate, an estimated 25 percent.