The cost of food: facts and figures
Explore the facts and figures behind the rising price of food across the globe (8 April 2008)
See link from BBC News
See link from BBC News
posted by Hwee Ling at
8:51 PM
posted by Hwee Ling at
8:51 PM
4 Comments:
I've just read an article regarding the rice crisis in Asia, and I have a few questions regarding the article (some economic concepts).
article: http://www.time.com/time/printout/0,8816,1729546,00.html
What I've gathered from this article about the rice crisis are as follows:-
It's caused by:-
* a steady rise in AD due to:-
o greater affluence amongst people in developing countries like China, tend to eat more
o 'surging' Asian populations
* and a fall in (domestic) AS due to:-
o lacking of farming land as a result of rapid industralisation in countries that export rice
o bad weather conditions decreasing crop pool
o suppliers' resistance to sell rice, because the domestic prices are much lower than international market price
What puzzles me, is the policies implemented by the local governments: to ban exports of domestic rice. Yet, as mentioned in the article, it would not solve the rice problem... tho I dun understand why...
I feel that one way to solve this problem, would be to increase the domestic production of rice in the rice export countries, by supplying more seeds, putting agriculture concerns on top priority to allow an increase of land made available for rice plantations.
The government, in an effort to keep as much rice as possible at home to quell inflation, has banned exports of nonbasmati rice and adjusted price controls to discourage exports of aromatic basmati rice. "In desperation, the government is trying to isolate the domestic market," says economist B.B. Bhattacharya, vice chancellor at New Delhi's Jawaharlal Nehru University.
The problem is that intervention usually has unintended consequences. In theory, the export ban should ease prices in India because more rice should be available. But because the global price remains a benchmark, Indian rice traders are resistant to selling their stocks for much less than they would get on the international market. That means less rice on the domestic market and higher prices for Indians. As economist Swaminathan S. Anklesaria Aiyar wrote recently in the Times of India, cutting exports is a form of national hoarding: "Governments would like to believe that hoarding by traders is terrible, whereas hoarding by governments promotes the public interest. But the impact on prices is exactly the same. Indeed, when governments start to hoard food out of panic, the panic itself stokes further inflationary fears." *Why would the hoarding of rice of the government cause further inflation? Domestic supply should increase, isn't it? Unless as a result of the panic, demand also rises rapidly??*
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