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Food Inflation

December 4th, 2009

Food Inflation The rise in prices of edible commodities is called food inflation. Today, we are going through the worse level of inflation in the last 17 years. The overall rise in food prices in 2007 in the U.S., according to federal statistics, seems to be bearable — 4 percent. But it is the highest rate since the early 1990s, and it is more than the pay raises most people are receiving and it definitely seems to be getting worse.

The most significant part is that prices for many staples are rising much faster than the overall consumer price index for food. Eggs are 25 percent milk is up 13 percent, cheese nearly 15 percent costlier than a year ago. In Pakistan and Thailand, paramilitary troops have been deployed to prevent food theft from farms and storehouses.

World Bank president Robert Zoellick warned that 33 countries are at risk of social agitation because of rising food prices. Much of this rise is being attributed to the diversion of food-crops into energy generation .For example; maize is extensively used to make bio-diesel. This causes a lot of pressure on maize prices which then cause all the commodities to go up. Also, a lot of farms in Brazil are now cultivating plants like jathropa which is used to make bio diesel, instead of food grains.

This is creating scarcity of food grains in the world market shooting up prices. Countries like India have placed severe restrictions on export of food grains from their country causing a speculative interest in commodities all over the world. Thailand, which is largest exporter of rice in the world, is not able to export enough of it. This has led to two fold increase in the price of rice.

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