I remember, not too recently, when supermarkets where happily having a price war over the price of bread, and you could easily pick up a loaf of bread for 7p. However, the 7p loaf seems a distant memory now as the price of wheat has increased from £90 a tonne to £180. Many loaves now cost over £1.
The price of wheat and food prices is being driven higher by various factors
- Increased Use of Biofuels. Food such as mazie, grown to provide renewable energy and an alternative to oil. However, these crops reduce the supply of food for the market. Many governments especially in America are committed to increasing the amount of bio fuels and so this could contribute to rising prices.
- Rising World Population. The global population is expected to rise from 6 billion in 2000 to 9 billion by 2050. This will place increasing strain on the land.
- Desertification. Global warming and other environmental shifts is decreasing the quantity of available farmland, especially on the African continent. If global warming continues water supplies could be disrupted leading to falling food production. This will only place further strain on food prices in future.
I think there is a good chance that food prices will continue to increase in the long term. This is not such a problem for western economies – food is a small % of our total bill. But, it is bad news for developing countries where food consumption is a much bigger % of income.