Wall Street Journal: Higher Food Prices to Hit Europe
The global rise in food prices is catching up with continental Europe, adding to mounting inflation worries…Rising global food demand, freakish weather and the trend to reroute crops for biofuels are pushing up food-commodity prices globally.
China Daily: Price rises take a toll in Shanghai
Inflation is touching the lives of nearly everyone in Shanghai. The price of a beef-filled snack at a store popular with office workers in the central business district has jumped from 1.5 yuan apiece to 1.7 yuan. Bottled water, found in many Shanghai homes, has risen to 17 yuan from 16 yuan just a week ago.
Domestic help has also become more expensive. Cleaner Cai Li said her hourly rate has risen by 30 percent to 10 yuan.
“I need the extra money to buy food for my family,” she said.
The average price of pork at the city’s markets has increased 25 percent to 26 yuan per kg and egg prices have averaged around 8 yuan per kg. Prices of fish and chicken have also increased 10 to 15 percent from the year before.
Hungarian Newspaper Portofolio: Food price hike revs up inflation forecasts in Hungary
New Zealand’s online business new site, Stuff.co.nz: Food prices start to bite
Canada’s national post newspaper: Get ready for food-price spike
Soth Africa business report: Food price rises are a major factor behind the wave of strikes
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You may mistake the above commentary with a Hollywood disaster movied script, but these headlines, in fact, are real life events, all fed by google news withing a narrow window of last twelve hours.
I believe those above mentioned headlines did cover a representative section of the developed first world and bigger economies. Don’t forget the fact that, countries like those in Europe, New Zealand or Canada historically maintain huge buffer food stock and backup supply chain to prevent unexpected food price hike. That’s why we don’t see a significant variation in food price in the groceries of a developed country.
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It can be clearly presumed that the supply-demand discrepency did start quite a while ago and needed a long time to finally menifest as short supply and price hike in the markets of Germany or New Zealand. To the contrary, the market in Bangladesh barely manages and don’t have the luxury of a buffer and backup. So it can be safely assumed that the price hike that is menifested today in first world market place, would hit Bangladesh much earlier, just when the global supply demand discrepancy started. And exactly that happened in Bangladesh, price hike started early last year.
It is expected that in the first world market and bigger economies, with restoration of supply chain, initiation of backups; the price hike problem will correct itself. However in a third world economy, like that in Bangladesh, the market correction is not expected to be as quick and as automatic. The flood that destroyed millions of acres of cultivated land will further hamper the recovery process.
It is very intriguing to see how countries like China, Canada, New Zealand or EU are bracing the problem and what steps they are taking. In our case, we are still occupied with Tareq Zia theory, i.e. Tareq Zia’s corruption made the essential price so high and all pieces of evil in this planet. Our observers, analysts, experts rarely tried to dig in the real cause.
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Recently, in different blogs, I got excited at ritual Tareq bashing. Rather focusing, exploring and analysing the problem, we try to demonize one single character behind all the vices that is happening to the country and then hope that, once that vice is gone all pain will disappear in one night and there will be continous happines. This is in fact our national trait. That’s why the nation went into sudden disbelief and confusion at the absence of drastic change after 1971. That’s why hyistorically we had the shocks of post independence famine, post Mujib chaos, post Sattar autocracy, post Ershad disappointment and post 1/11 market place inferno.
Tarek Zia has two kinds of problem. One I saw in my own eyes. Those are arrogance, stupidity, abuse of power and gross political mistakes. Other is corruption charges. For that part I am still waiting for the government show me some proof. It is impossible to believe that government won’t be able to show proof of one single corruption. Without that I simply refuse to join the corruption chorus. Whatsoever, I like to see him behind the bars for a longer time, at least for his political failure, abuse of administration for his own childlish adventures.
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Lets go back to price hike issue. China, Europe and all other are going all nine yards to find the root cause the supply demand breakdown. Europe has already identified the over enthusiastic bio-fuel cultivation behind lack of food supply. China is suggesting construction boom, diversion agriculture manpower, resources to construction, failing to expand agriculture with demand as potential causes.
We also need to go to the root of the causes. Our brighter minds can’t afford to remain obsessed with Tareq Zia. With no stock-supply buffer, high price in global market and destruction of crops by this recent flood, price of essentials is poised to take a worse course. It is extremely important we prepare ourselves for the storm that is coming our way.
August 15, 2007 at 12:38 am
Tareq Zia is out of scenario for last 8 months. CTG is in power, so obviously Tareq Zia is not an issue for high price in the market. It is nation’s nature to blame opposition for each and everything and try to gain something out of it politically. Politicians destroyed the thinking process, ideology, intellect of the poor, innocent, uneducated and religious people of Bangladesh and unfortunately they are the majority. So it is a normal process to make people understand with cheap explanation.
I think day by day situation is worsening and actually what is going to happen is devastating. Not only famine (may be not in a usual known way) but also a civil war or invasion.
Is there anybody who can show some hope in this stage (considering national and international factors)………
August 15, 2007 at 2:23 am
The last government does deserve a major blame for rising food prices, but not because of the usual ‘Tareq and his friends were corrupt’ way. The blame should go to the Agriculture, Food and Finance ministries.
Since the late 1970s, Bangladesh had slowly built up a food stock buffer system. This was government-run, and unlike most other government-run things, this actually worked reasonably well under successive governments. This is why, despite floods and other natural disasters, food prices remained reasonably stable during the 1980s and 1990s.
In the early years of the last government, it was noted by the Finance ministry, possibly with some advice from WB/IMF, that the food buffer system was government-run and should be privatised. Now, obviously the market didn’t work too well in the early 1970s and we had the 1974 famine (Amartya Sen found in his research that more than political problems, it was a food price issue that caused the famine). So one should have been sceptical about the privatising effort. At the very least, the privatisation should have been done very carefully.
My understanding, based on discussions with government officers and other practitioners, is that the Agriculture and Food ministries failed abysmally in the privatisation effort. As a result, the food buffer system that was created during President Zia’s era was effectively dismantled in the last 5 years. As a result, as soon as the supply started drying up in the global market, prices started to rise. A better buffer system wouldn’t have prevented the price rise, but it would have smoothened the process.
Some argue that the agriculture ministry also deserves blame for failing to provide adequate support to farmers and as a result domestic food supply was hurt. I am not sure if this is true, but I wouldn’t be surprised. Incidentally, Agriculture minister in the earlier part of the government was Matiur Rahman Nizami.
If BNP government deserves some blame, then the current regime deserves blame too, on two counts. First, the current regime deliberately fuelled the misleading line that ‘price rises are Tareq’s fault’, contributing to the problem as mentioned in the post. Second, and more damaging, is the way it destroyed supply networks – bazaars and other informal markets – in the name of ‘clean up’ process in the first weeks after the coup.
Going forward, things do look very uncertain.
August 15, 2007 at 10:19 am
Jyoti bhai,
Eita ki shunailen? Who had the bright idea of privatising things that are working? Please educate this urbanised illiterate with a bit more info on the food stock buffer, and where to look for for information on the privatisation.
Another timely post Rumi bhai. Simple explanations befit us. Not because our people are “uneducated” and “politically conscious” at the same time, but because of the educated ones among us. Whenever someone tries to give a real-world, complex picture, the educated start screaming: “aatel”, “intellectual”, “expert”, “Foreign-donorer taka khawa” and of course, my favourite from UV, “pulling MIT on Bangladesh”.
We might disagree with complex social science research, but if this is how we denigrate research and researchers alike, we will never focus on the real issues and always look for a convenient scapegoat, be it TZ for food prices or Ershad for corruption or Mujib for the famine. As we push researchers into greater irrelevance, expect more scapegoating. Please note, that it is not the “uneducated Bangali peasants” who do this, but the urban educated middle-classes.
August 15, 2007 at 10:39 am
Jyoti
I was really surprised at the info you just provided. I didn’t know our food buffer was privatized ( Was is WB/IMF prescription?).
See, this is the problem, we remain so focused on persons Mujib. Zia, Ershad, SH, KZ, TZ, we fail to identify a failed policy, and analyze the cause of the failure.
Jyoti, AsifY , I believe, the blog readers around the globe, expects more from you folks on these issues.
August 15, 2007 at 3:17 pm
AsifY/Rumi bhai,
I’m trying to find more ‘on the record’ info on the food buffer issue.
August 15, 2007 at 11:09 pm
[See, this is the problem, we remain so focused on persons Mujib. Zia, Ershad, SH, KZ, TZ, we fail to identify a failed policy, and analyze the cause of the failure.]
That is the goal of int’l lending agencies and countries who bully us everyday be that corruption or politics. They want us to focus on artificial issues that only distract us real issues. Well failed state propaganda trail will tell you who wishes what from Bangladesh.
As for price of food and essentials, its good see more people realizing it is nothing to do with Hawa bhaban. In a country like ours where we not only have to deal with providing food for 140 million people but also have to deal with fast increasing population and fast decreasing agricultural land. Not to mention eating habit and buying capacity of people has changed from what were 10 to 15 years ago. Just to give you example, even 10-15 years ago I was lucky to be treated with rice phita when I visited village relatives. If you go today you will most likely be treated with Pran or Pringles. Surprise – but this is just an example to show that our requirement for food safety and affordable price has whole new meaning.
I am not sure what Jyoti is looking to find but what were enough 10 -15 years ago is no longer enough in quantity, category and in distribution. And with limited resources its not 1-2-3 or 5 years task creating a deep enough and flexible system that can withstand natural and market shock. It takes much longer than that….
By the way Daily Star, Prothom Alo and other news papers dedicated their front page with propaganda story yet there was no meaningful analysis on real issue and no realistic suggestion from worthless sushils? We actually should dig and find why newspapers and sushil always able to detract us from real issue?
Here is my two cents on what we can do for food security and price shock:
1) Try to increase agricultural land by reclaiming coastal land, try lease foreign agri land. Some initiative on this regard had been taken during last elected govt hope this and next govt continue on that.
2) Increase productivity.
3) Stream line distribution and marketing system so middleman can be marginalized.
4) Improved and stricter import and distribution tracking.
5) Diversify import source
6) Develop long term weather and market forecasting
August 18, 2007 at 10:55 am
[...] and even makes a few policy prescriptions that largely make sense to me. It’s a follow-up to Rumi bhai’s great post on his blog a few days ago. Required reading, both. As they say – check them [...]
August 27, 2007 at 2:37 am
Sounds like such a long time ago when we were discussing food prices! Anyway, here’s something by the Economist.
The agonies of agflation
Aug 25th 2007 From Economist.com
Fuel for the body and the car
SHARING pain is usually deemed a good thing. So advocates of dishing out agony will be gladdened that the wallet-crunching pangs of car drivers filling up with petrol are now equalled by the wince-inducing stabs felt by shoppers piling up their supermarket trolleys. As oil prices stay high, wheat prices hit an all-time peak of over $7.50 a bushel for December delivery at the end of trading in Chicago on Thursday August 23rd.
The soaring prices of bushels and barrels are not unconnected. The cost of agricultural commodities, just like oil and metals, has gone up sharply over the past couple of years. Aside from wheat, the prices of corn, rice and barley have all risen by over a third since 2005. Food prices around the world are rising so quickly that a new term has been coined to describe the ballooning price of breakfast staples and dinner-time favourites: agflation.
The latest spike in wheat prices has come in response to news that Canada’s crop could be reduced by roughly a fifth this year after bad weather hit the world’s second-largest exporter. This sent countries that rely on imported wheat, such as Japan and Taiwan, scampering to the market to secure supplies. Whether climate change is to blame for Canada’s poor summer is unclear but its underlying pressure on prices is in less doubt.
Demand for grain is accelerating not to feed humans or livestock but to fill petrol tanks. Compared with 2000, three-times more corn is used to make ethanol in America; distilleries that produce biofuels hoover up a fifth of the country’s corn supplies. Demand for cleaner energy in turn keeps demand for corn growing. Farmers are having trouble keeping pace with the burgeoning biofuel industry. And to produce more corn farmers are switching production from wheat and soya, pushing up the prices of those crops too.
On top of these pressures, rising prosperity in poorer countries, particularly India and China, is also lifting prices. Normally the response of the world’s farmers would be to increase output by planting on marginal land. This is happening. In the coming year the International Grains Council reckons that global grain production will hit 1,660m tonnes, some 90m tonnes more than last year. Nevertheless, demand will still outstrip supply. The wheat crop hit by Canada’s run of bad weather is likely to weigh in at 607m tonnes while demand may top 614m tonnes.
And the reverberations are felt right down the menu. As grain prices rise so do the prices of other agricultural products that rely on it as an input. As the cost of keeping poultry and livestock goes up so do the prices of eggs, chickens and other meat. Even if new land is planted this may not help to push down food prices. Because generous subsidies ensure that biofuel production is handily profitable, that industry is likely to grab new grain supplies to prime its distilling towers.
Agflation can also cause headaches for central banks. In most countries, the measures of core inflation that banks monitor most closely when making decisions about monetary policy exclude food and energy prices. Both are volatile and vulnerable to supply shocks. As central banks try to control demand they tend not to react to price fluctuations caused by see-sawing supply.
But in consumer-price indices, at least in some countries, food has a greater impact. In America food carries just 14% of the weight of the consumer-price index, but in China it accounts for 33% and in India 46%. In such countries the rising price of food obviously could push up inflation levels overall. In addition, if food prices stay high, and if consumers spend less on other goods, other parts of the economy might suffer. Good reason, therefore, for central bankers and others to hope that the pain of agflation is not shared too widely.
August 27, 2007 at 11:53 am
Interesting read Jyoti bhai. I was watching a TV program that talked about the rising prices of food crops thanks to land diversion for growing corn and other things needed for biofuel. Here’s an old link: http://www.cbc.ca/consumer/story/2007/05/22/corn.html
On another front, I remember from your UV post and Mr. Faruque’s comments there that the informal markets play a part in this as well. You mentioned their eviction and Mr. Faruque mentioned the informal trade that goes on with India.
Two quesetions: how dependent is our population on the informal sector for food?
And how much do BD-researching economists focus on the informal sector, which I imagine (but don’t know!) is most of the economy?