As global food prices skyrocket to an all-time high, world leaders and analysts worry that 2011 could become the year of the global food crisis.
Darrel Good, a professor of agricultural and consumer economics at Illinois, is an expert on agricultural commodity markets. He spoke with News Bureau Business and Law editor Phil Ciciora about what effect reduced stockpiles of corn, wheat and soybeans could have on farmers as well as consumers.
With global commodity prices soaring, how close are we to experiencing a world food crisis?
There's been a lot of talk of a global food crisis as well as worries about political unrest similar to what the world experienced in 2008, but such a crisis does not appear to be imminent.
The current price increase in commodities has been more gradual and is therefore potentially more sustainable than what happened in 2008. Since the increase in prices has been more gradual, there's recognition now that we've been here before and survived it, and that this is nothing new. So there is a difference now than when we experienced those high prices back in 2008.
Having said that, however, another round of higher prices from the current level would be problematic. There is a lot riding on global crop production in 2011. Good weather and large crops are needed to hold the line on food prices.
How much of this increase in crop prices is attributable to the current La Nina weather cycle?
Price increases over the past three months have been partially the result of La Nina, or at least weather in general - drought in Argentina, too much rain in Australia and Malaysia, and very dry conditions across the central U.S.
Do you expect commodity prices to continue to be particularly volatile this year?
Yes. Until global stocks of the major crops are rebuilt, there will be a lot of uncertainty as well as the potential for high and volatile prices going forward.
What do rising commodity prices mean for farmers?
Rising commodity prices point to higher input costs - specifically, seed and fertilizer - for farmers. In general, however, higher commodity prices suggest that the returns on crops will increase more than costs.
Along with paying more at the pump, can consumers now expect to pay more at the supermarket? With oil prices heading toward $100 per barrel, will that only further inflate food prices?
Food prices are on the rise due to higher commodity prices. But higher energy prices will also increase the cost of processing, packaging and delivering food products. These factors will all only add to the price of food.