Krugman on food prices (NYT):
The financial crisis gets most of the attention from the business press — but in terms of sheer human impact, the current food crisis may well be a bigger deal:
“Governments across the developing world are scrambling to boost farm imports and restrict exports in an attempt to forestall rising food prices and social unrest.
The moves mark a rapid shift away from protecting farmers, who are generally the beneficiaries of food import tariffs, towards cushioning consumers from food shortages and rising prices.
But economists warned that such actions risked provoking an upward spiral in global food prices, which have already been pushed higher by rising demand from emerging markets like China and India and pressure on land from the growing production of bio-fuels.”
What I don’t quite understand is why food prices have spiked so dramatically. Demand has been rising for a number of years; bio-fuels is a big thing, but how much bigger is it this year than a year or two ago? It can’t be speculation: that raises prices by inducing stockpiling, and stocks of wheat and rice are at or near record lows.