Uh Oh: World Food Prices Spike As Soy Harvest Collapses
April 29, 2012
Among the things we watch here at Via Meadia are trends in world food prices. Middle class Americans grumble when prices go up at the supermarket ($5 bucks for a box of cornflakes? Are these people insane?) but for billions of people all over the world rising food prices can mean the difference between happy kids and hungry ones, between having a little money for extras at the end of the week and skipping meals.
The news on that front is suddenly not good: as the FT reports, the soybean harvest in Latin America has been badly hit by La Niña caused droughts. That doesn’t just mean a sharp increase in edamame prices at the local sushi spot and a sharp spike in tofu down at Whole Foods. For much of the world, soybeans are a primary source of protein and because they are used to feed animals, soybean price increases affect many other foods. Soybean is also an important source of cooking oil in baked goods (like bread), and this year’s spike in soy prices is made worse by rising prices for other edible oils.
The US Department of Agriculture believes that soybean production is headed for its biggest global drop ever — or at least since 1965 which is when the US started tracking global soybean production. Prices are now higher than they have been in four years, and could reach record levels later in the year.
This is particularly bad news in China, where food inflation already worries a government facing social unrest and economic instability. Soybeans generally, and Latin American soybeans in particular, play a major role in the Chinese diet.