Free Markets, Demand and Supply Essay Sample

Despite of the global food crises we are experiencing now, it is amazing to note that over the last 20 years there has been a steady rise in food production at about 2% a year. Population growth on the other hand has dropped to 1.14% thus population is not outstripping food supply. More people are hungry though, but are kept away from the food in the market shelves by the high price tags.

I chose to read and write on the report by the United States Department of Agriculture. It is a very comprehensive report on the Agricultural supply and demand and also addresses the rising food commodity prices. I found it biased in the fact that the U.S has taken no responsibly in these crisis yet it has been in the front line in the production and use of bio - fuels that come mainly from corn. Corn is a staple food the world over and the increase in demand of this commodity has led to farmers selling off their crop for use in bio - diesel production rather than for food consumption since the prices are higher. This in turn raises the demand since the supply has been diverted to other uses and thus raising the consumer prices. This report is produced by the United Stated Department of Agriculture and as expected it would not write a report that would put the United States in bad light to the rest of the world. I find it 'incomplete' though educational.

According to Trostle, global warming and shifts in weather patterns have deeply impacted on the food production in the bread baskets of the world like China, Bangladesh and Australia. The production of staples like wheat, corn and rice has reduced and this has pushed the prices of these products to the roof. The poor countries have been deeply affected and the richer nations too feel the pinch of the escalating food prices. Food is a basic necessity and its pricing thus has a direct effect on all other sectors of the economy. A rise in the prices of oil has had also an impact on the price of food. Oil is used in the transportation of food from the farms and in the plants that process the food, an increase in the production costs is passed down to the final consumers thus raising the cost of food.

The impact of food prises has brought on many challenges in Kenya. This country that is dependent on agriculture to feed its population who mostly depend on corn. In 2007-2008, the country went through post election violence which saw over 20% of its prime corn growing land in the Rift valley taken out of production. The weather on the other hand changed its pattern and the long rains expected did not fall. The increase in production led to increased wholesale and retail prices of corn. The shortage in domestically grown corn led to importation which raised the prices due to the high import charges that were passed on to the consumers. The prices of fuel led to increased production and transportation charges that were also handed down to the consumers.

This led to a rise in the number of people living below the poverty line. Most of the farmers had lost their livelihood and had no income. This also meant that most children did not go to school due to hunger or lack of school fees for their education. Idleness, hunger and desperation saw the crime rates rise. There was a reported rise in malnutrition and disease susceptibility especially among children. Wages are declining due to increased casual jobs demand.

Russia is one of the largest wheat producers in the world with an estimated production of 100 million tons of wheat a year, which is 10% of the world's wheat. Its main markets are in Europe and the Middle East. Droughts and wild fires have reduced this production to almost under 65 tons meaning that Russia can only afford to hold on to reserves enough for its domestic demand just in case draught escalates. Wild fires affect the grain growing belt directly or alternatively disrupt the transport network from the fields to the target markets.

Being dependant on food commodities imports makes Russia a slave to the international markets. When a crisis occurs in one part of the world, its effects will definitely be felt in Russia. Food volatility has a long history in Russia with others terming grain the 'currency of currencies'. Grain is thus more than just feeding its people, its Russia's overall domestic economic security. As such, a food crisis even outside its boundaries would spell doom for this country.

 

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