LIANE HANSEN, host:
In recent years, consumers in the United States haven't had to face much inflation in food prices. But in Northern Africa, India, the Philippines, Indonesia and elsewhere, food prices have been surging. And in some countries, the price hikes have sparked street protests, even violence.
NPR's senior business editor Marilyn Geewax is back to talk about what's behind the high cost of food, and what it could be mean for Americans.
Welcome back, Marilyn.
MARILYN GEEWAX: Hi, Liane.
HANSEN: How serious is this? I mean are food prices really that high?
GEEWAX: Well, there's a new United Nations report on global food prices, and it shows its index is at a record high - even higher than the last time we had a food crisis, about three years ago. Remember back in early 2008 - just before the financial crisis hit - rising prices were causing riots in dozens of countries.
So it's not surprising that today, in places like Tunisia, Yemen, Egypt, political unrest is starting to break out again. In so many countries, prices are up 30 percent for basic things; rice, cooking oil, sugar, wheat. People are hungry. They're angry. And that's contributing to this political turmoil.
HANSEN: So why are the food prices rising?
GEEWAX: In some ways, the reason is really simple: It's just supply and demand. The supply of food has been hurt by bad weather in a lot of regions. Russia, Ukraine, Argentina, they had terrible droughts. And then Pakistan and Australia had some epic flooding.
But, at the same time, the demand has been rising. As people in developing countries, like India and China, start to earn bigger paychecks, you know, they're going to want bigger meals and better meals. So thats driving up the price of food.
And then there's the rising petroleum costs - oil is used for fuel in tractors, for transportation. So when you put all of this together - youve got constricted supplies for crops, growing demand for food and higher production and transportation costs - it's going to mean higher prices for consumers.
But even that isn't the whole story. There are other factors that are more complicated. You know, we've got currency fluctuations, trade policies, financial speculation in commodities markets, and energy policy - it plays a role too, because ethanol makers want to use more corn. So we've got a lot factors that are coming together and causing higher food prices.
HANSEN: But why is inflation so much worse in other countries? Americans haven't seen the huge price jumps here.
GEEWAX: That's right, Liane. Here in the United States, we've actually been enjoying a period of pretty low grocery prices. The USDA just released a study that showed that last year, U.S. food prices rose less than one percent. And the reason they're so restrained here is that the cost of the actual food is a relative small part of what we pay.
Whether we're buying a box of corn flakes or a cup of Starbucks coffee, mostly what we're buying is the packaging, the marketing, the attractive store fixtures. So we don't have that much sensitivity to the underlying commodity prices; certainly not the way poorer people do when they buy, say, a simple sack of rice.
But still, we're not going to be immune to these global pricing forces. The USDA thinks that in the coming year, prices will be up about three percent.
HANSEN: So what can be done?
GEEWAX: Well, some countries are trying to impose price caps. But in the long run, the only solution really is to increase the supply of food. Some economists say that poor countries have to do more to invest in roads and irrigation, and they have to reduce their agricultural waste. In India, for example, about a third of the produce rots before it can even reach the customers because they dont have the infrastructure for chilling and delivering the food.
And now, we've got so many people moving into cities all over the world, more will have to be done to encourage urban farming. And then there are more controversial proposals, like increasing the use of genetically-modified seeds, controlling population, and opening up markets to more global trade.
HANSEN: NPR's senior business editor Marilyn Geewax. Thank you, Marilyn.
GEEWAX: You're welcome, Liane.
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