'Marketplace' Report: Food Prices
MADELEINE BRAND, host:
From NPR News, this is Day to Day.
Higher food prices are here to stay, and they may go even higher. That's what a new report from the United Nations says. Marketplace's Amy Scott is here now. And Amy, what kinds of increases does the report say that we can expect?
AMY SCOTT: Well, the report is from the United Nations Food and Agriculture Organization, or UNFAO, and the Organization for Economic Cooperation and Development, or OECD, and they are expecting food prices to come down from some of the record highs we've been seeing as some of the short-term causes like bad weather and certain economic policies diminish. But overall, thanks to higher demand and things like higher oil prices, we can expect to pay more in the next decade than we did in the previous ten years. Things like wheat and corn can cost 40 to 60 percent more, beef and pork may cost 20 percent more.
BRAND: So, what, would that translate into higher prices at the grocery store?
SCOTT: It will, but it sort of depends where you live. I spoke with economist Chris Hurt at Purdue University and he told me that in the developed world, where foods tend to be more processed, the actual commodity, like wheat or corn, makes up about 20 percent of the retail price. So, that insulates us a bit from swings in commodity prices. But in the developing world, where there is a lot less processing, you know the staple like rice or bread is much closer to the commodity. That's where you are seeing much bigger increases that are really hurting people.
A UN official I spoke to said 100 million more people around the world could be pushed below the poverty line because of these high prices. Now economist Chris Hurt has one critique of the UN report. He says prices may come down even more as food produces respond to the increase in demand.
Mr. CHRIS HURT (Economist, Purdue University): So it generally takes about a three-to-five-year lag for the supply to begin to get built up after these periods of very short stocks. So I think the paper may be may be a little bit shortsighted in not saying we can expect to see the producers of the world respond. And maybe respond pretty dramatically to bring back that supply to higher levels.
SCOTT: One thing the report recommends is greater use of genetically modified crops to increase food production.
BRAND: And what else does it say we should do?
SCOTT: Well, it urges countries to rethink their biofuel policies. Here in the U.S. about a quarter of the corn crop is expected to go toward ethanol production within about 15 years. And the report says biofuel is the single biggest new demand that is pushing prices up, but that the economic and environmental benefits are quote, "at best modest and sometimes even negative." We can expect to hear more proposed solutions next week when about 40 world leaders meet in Rome to discuss these issues.
BRAND: Thanks Amy. That's Amy Scott of public radio's daily business show, Marketplace.
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