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From Washington Independent:           By MARY KANE 04/23/2008 

A sharp spike in prices for wheat, corn, rice and other staples has sparked riots in Mexico and Egypt, marches by hungry children in Yemen and the spectre of starving people in Haiti turning to mud pies for sustenance. This growing unrest is forcing the global community to focus on the causes of higher food costs and what can be done. But it’s also raising the troubling possibility that cheap prices for food may be gone for good, an economic relic of the the past. 

That scenario would be disastrous for the progress of fighting poverty in poor countries - and it would threaten to halt a long period of rising living standards in the United States tied directly to the inexpensive cost of food.

“Don’t look now, but the good times may have just stopped rolling,” the economist Paul Krugmanwrote in his New York Times column. The Economist was more strident: “The era of cheap food is over,” it declared. World Bank President Robert Zoellick, reaching back to policies created during the Great Depression for inspiration to address food inflation, is pushing a “New Deal” for global food policy, aimed at aiding impoverished countries with income support and help in producing crops.

The gloom-and-doom outlooks are prompted by rising prices for commodities, which started increasing steadily in 2001 before suddenly soaring recently. Wheat prices have gone up by 181 percent over the past three years, according to the World Bank; food prices around the globe have risen by 83 percent during the same period. In March, rice prices hit a 19-year high. Corn pricesrecently rose from $2.50 a bushel three years ago to $6, for the first time. Zoellick has predicted a sustained period of higher food costs, saying he expects prices to remain elevated through next year and stay above 2004 levels for at least the next seven years.

The causes are many. India and China have growing populations and are becoming more prosperous; more people can now afford to eat more meat, and the demand for animal feed has grown. In the U.S. and Europe, a boom in biofuel as alternative energy is diverting considerable amounts of corn from the market. A severe drought in Australia has contributed to a 25-year low in supplies. Some also blame speculation in the commodity markets for sharp swings in prices and availability.

While plenty of people are worried about the end of cheap food, it’s not clear yet whether that will happen, said David Orden, senior research fellow with the International Food Policy Research Institute. Things like the weak dollar becoming stronger, crop shortfalls easing, energy prices stabilizing and strong growth in the world economy are all factors that could affect the availability of food, he said, and no one’s sure how they will play out. “We just don’t know yet,” Orden said. “Before this bump in food prices started, people were not predicting it.”

What has become clear is that in a short time, soaring food costs have shaken some long-held assumptions about food and fuel, especially in the U.S.

Food has been cheap in America for nearly 60 years, and Americans set aside less of their incomes for food than any other country in the world, devoting just 11 percent of disposable income to it, compared to double that percentage in Europe. Keeping food costs low has been one of the great economic achievements of the last century. The low food costs, combined with rising incomes, “have been two of the primary sources of prosperity for American consumers,” said John Urbanchuck, an agriculture industry analyst for LECG, a global consulting firm.

Until now, Americans had the luxury of worrying about food due to its abundance. Concerns have centered on childhood obesity and an epidemic of diabetes. But new problems with food are already surfacing, as rising prices begin showing up at the grocery store. More expensive corn means people pay more for eggs and poultry, and still higher meat and milk prices are on the horizon. Record high oil prices are adding to price pressures, since transporting food costs more.

If prices stay high for a long time, the poor will be hit the hardest, since they spend the largest percentage of their incomes on food. Efforts to reduce hunger, like food stamps and free and reduced lunch programs, will become more costly, said Otto Doering, a professor of agricultural economics at Purdue University in Indiana. Asking taxpayers to pay more for them won’t exactly be politically popular, since food prices could also take a greater bite out of middle-class budgets. And paying more for food will mean having less to spend on things like big-screen television sets and iPods, putting a dent in the kind of consumer spending that has kept the economy growing for the past two decades.

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