Evaluating the Causes of Rising Food Prices in Low and Middle Income Countries

By Yeboah, Osei; Shaik, Saleem et al. | Journal of Agricultural and Applied Economics, August 2012 | Go to article overview

Evaluating the Causes of Rising Food Prices in Low and Middle Income Countries


Yeboah, Osei, Shaik, Saleem, Quaicoe, Obed, Journal of Agricultural and Applied Economics


The effects of population, income, prices of major inputs, and exchange rate of the U.S. dollar on the prices of three key agricultural and food commodities (feed grains, oilseed, and fruits) for 13 low-income countries and seven middle-income countries were evaluated. Given the short time period, a modified seeming unrelated regression-vector autoregressive model that incorporates the lagged exogenous variables property of time series models and the system of equation estimation is employed in the analysis. The study finds no single factor that persistently explains all soaring food prices as reported in the literature. The only factor that persistently explains soaring food prices are the contemporaneous and one-year lagged exchange rates and income.

Key Words: food prices, low and middle-income countries, seeming unrelated regressionvector autoregressive model

JEL Classifications: Fl, C3, Q17

Since the second half of 2006, world prices of most major food commodities began to climb. By the first half of 2008, international U.S. dollar prices of cereals had reached their highest levels in almost 30 years, threatening the food security of the poor worldwide and provoking widespread international concern over an apparent world food crisis. Even though the second half of 2008 saw a rapid fall in international food prices as oil prices tumbled and the financial crisis and global recession reduced demand, prices are well above the levels seen in recent years and are expected to remain so (Food and Agriculture Organization (FAO), 2009). Many poor consumers still face high or rising food prices. Moreover, while international food prices may have fallen, many of the adverse supply and market conditions remain unchanged.

While the broad facts of the soaring food prices episode may be well known, questions remain concerning the relative importance of the various factors suggested as being responsible. This is because the more recent price surge is much more broadly-based across food groups (World Bank, 201 1). As a result, various factors have been suggested as being responsible. These include biofuel demand, record oil prices, speculation and investment fund inflow, and increasing food demand arising from rapid economic growth in China and India or traditional market drivers such as low stock levels or weather-related supply shortfalls. The price of key inputs such as energy and fertilizer as well as exchange rate and other trade barriers such as import tariffs and export taxes have also been suggested as the probable cause.

Each of these factors may affect the prices of specific food and agricultural commodity prices. Biofuel production may reduce the availability of food commodities on the market since this new source of demand has been playing an important role in influencing prices of corn (a feedstock for ethanol production) and rapeseed (a feedstock for the production of biodiesel). The rapid economic growth, and increasing incomes in China and India particularly, are believed to be reflected in stronger demand for higher-value foods (such as livestock products) as opposed to starchy staples (such as wheat). However, the prices of starchy staples are equally rising. Therefore, the widely accepted notion that rising demand in these two most populous countries (China and India) is a reason for soaring food prices warrants re-examination (FAO, 2009).

Furthermore, a proportion of these price increases can be attributed to the depreciation of the U.S. dollar, in which international prices tend to be denominated. Because most commodity prices are commonly expressed in U.S. dollars, depreciation in the value of the U.S. dollar reduces the cost of commodities for countries whose currencies are stronger than the U.S. dollar, resulting in a cushioning of food price increases to a greater or lesser extent. On the other hand, for countries whose local currencies are pegged to or are weaker than the U. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Evaluating the Causes of Rising Food Prices in Low and Middle Income Countries
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.