Economic Effects of Rising Food Costs

Introduction

The recent food crisis has led to an increase in food prices all over the world. Thousands of families, especially in developing countries, have been affected, leading to high dependency on government food aids. Since the start of this century, food prices have been rising, with an average of 2.6 % yearly. According to the U.S Department of Agriculture, it is expected that the food prices will increase by 2.5 % in 2020 (Amadeo, 2019) . The rise in the prices is a result of high oil prices, Climate change, overconsumption, and unfavorable World Trade Organization policies. The increase in food prices negatively affects millions of households around the world, especially in developing countries. 

World Trade Organization 

The world trade organization controls all the trading activities around the world and ensures a free trade environment. The organization limits the number of subsidized cereals that a country produces and adds on the world stock. Through this, there has been a reduction in the amount of food available in the markets. Farmers based in developing countries are mostly affected as they receive unfair trade advantages (Amadeo, 2019) . Due to the reduction in the reduction of the amount of food in stock, the food prices increase. The import tariffs and taxes are also contributing to the rise in the prices. It has affected and reduced the surplus of food around the world. This has rendered countries that are dependent on exported and imported goods to financial strains. With financial strains, many countries can not afford to provide proper healthcare and educational services to the citizens. The residents in the nations who do not produce food products have greatly been affected as they cannot acquire the essential food nutrients leading to health issues. 

Changes in Oil Prices and Agriculture. 

Increase in oil prices, increase shipping costs. Foods tend to be transported over long distances; hence large amounts of oil are needed to achieve the process. Due to the high demand, many sectors within the food industry have been affected. Farming is also affected as the fertilizers used in the farms are made from oil byproducts. Between the years 2001 and 2007, there was a rise in oil prices. It led to a 40 % increase in the costs of growing cereals, including corn, soya beans, and wheat in the United States (Amadeo, 2019) . In Cambodia, farmers depend on diesel generators to pump household water and do irrigation. An increase in oil prices has led to a rise in the costs of transportation and the production of agricultural products. Many farmers have been left with no means of living as they cannot afford the oil need for farming. This has reduced their standards of living. 

Higher Poverty Rates 

Poverty is not only experienced in rural areas but also urban areas. The rising food costs are increasing the cost of living among many families. This will push several households beyond the poverty thresholds. Many families will not be in a position to spend their limited resources on other services apart from food. Due you the rise in the prices, many people are food-deprived. For instance, in 2004, approximately 2.7 million people living in Cambodia were food poor. Poorer households cannot manage to save any amount of money as they spend most of their funds on buying food products. Poor people spend approximately 83% of their funds on food consumption. 

Price of Rice and Wheat. 

Rice and wheat products such as bread and cakes stand to be the most taken products around the world. In Cambodia, rice constitutes 50% of low-income families' food consumption (Unicef, 2020) . Food prices have doubled between 2017 and 2018. The fluctuation in the process has impacted on the effects to reduce poverty worldwide. The world bank predicts that the poverty rate in Cambodia will increases by 0.5% due to a 10% increase in the prices of rice. The expected rate will increase in both the rural and urban regions. The increase in production, transportation costs, and exportation restrictions from some exporting countries have compounded to the rise in rice prices. 

Impact on health and nutrition 

According to research done on the effects of higher food prices, it was noted that high prices hinder people from eating healthy. Illness and deaths of people, especially the household members, can push many households, including the wealthy ones, into poverty (Meerman & Aphane, 2012) . With the high prices, many families will not be able to afford the available products leading to a reduction in calorie intake. The families will be forced to reduce the amount of food they purchase and also to consume less nutritious and cheaper meals. This will result in malnutrition and increase the risk of health shocks. They will have low immunity making them more susceptible to infectious diseases hence making them less productive. The groups at high risk are those with HIV/AIDS infection, poor rural and urban families, and fixed salary workers. It can also indirectly impact on the academic performances among students. 

At the global level, the food price spikes have slowed and hindered the achievement of the Millennium Development Goals (MDGs) related to nutrition (Meerman & Aphane, 2012) . The Millennium Development Goals aimed at making the world free from hunger and poverty. The increasing prices are threatening these goals as many families are pushed back to poverty, and there is a rise in hunger cases in the world. If the prices are not controlled and moderated, the MDGs will not be fully achieved by 2030. 

Agricultural timing 

Agricultural timing is very crucial in food production. Even though the rising price of food is associated with adverse effects, it also favors some farmers. The food producers are expected to gain from the fluctuation. Increasing the surplus of agricultural food products can increase production and even open way for agricultural development in these countries (Unicef, 2020) . The peasant farmers are also expected to benefit from the fluctuation as they will be in a position of selling their farm produce at a lower price. They will hence gain some funds, thus leading to a rise in their living standards. 

Conclusion 

The recent food crisis in the world has led to increases in food prices in many countries. Thousands of families, especially in the poor developing countries, have been affected, leading to high dependency on government and NGOs' food aids. Since the start of this century, food prices have been rising, with an average of 2.6 % yearly. The rise has positively affected the peasant farmers who can sell their food products at lower prices to the community members. The fluctuation has negatively impacted many families and countries. There has been an increase in poverty rates, poor nutrition, and a rise in infectious diseases. If this issue is not addressed, many low-income families will continue to suffer. It will lead to an increase in the number of deaths arising from hunger and malnutrition cases 

References. 

Amadeo, K. (2019). Why Food Prices Are Rising, Recent Trends, and 2019 Forecast. The Balance. https://www.thebalance.com/why-are-food-prices-rising-causes-of-food-price-inflation-3306099 

Meerman, J., & Aphane, J. (2012). Impact of high food prices on nutrition.  Rome: Food and Agriculture Organization of the United Nations . 

Unicef (2020). Rising Food Prices Discussion Paper. Unicef Organization. https://www.unicef.org/socialpolicy/files/Rising_Food_Prices_Discussion_paper.pdf