Oil and food prices

The food index of the FAO (Food & Agricultural Organisation) and the oil index of the EIA (Energy Information Administration) show a very high degree of correlation: 0.93.

In June 2013 the World Bank has issued a new report confirming what most of us have known for a long time; the rising prices of raw oil make the largest contribution to the rising food prices. A shock for the growing hordes who believe in the myth that maize more than ethanol is the largest driving factor of the increasing food prices.

A research examined five different internationally traded crops (maize, wheat, rice, soy and palm oil) and investigated the impact of the contributing factors for each of them.

 

 

Two thirds of the rise of the oil price was caused by the rise of the price of wheat.

Oil is used in all aspects of the production and distribution of foods. From the production of fertilizers to the use of farming machines and food transport.

Bioenergy is the principal new rising source for food grain demand. The correlation between food prices and bio fuel process is also larger than generally assumed. The rise of bio fuel may lead to the use of 50% of all maize production (bio ethanol) in the U.S. towards 2013.

 

 

The rising demand of bio fuel therefore also leads to higher food prices. In particular for crops which can be used for food as well as for fuel, the food provision can be especially at issue. In January 2007 protests broke out in Mexico, which were caused by price increases of 400% for tortillas, which in their turn were caused due to the increased demand for maize and bio fuel in the United States.

Scientists as well as the market expect a continual rise of food prices. Not only the increasing oil demand, urbanization, global population growth and climate change, but also the growing demand for sustainable bio energy has fundamentally changed the market of food provision.

 

 

The global agricultural sector meanwhile cries out for capital. In order to provide for the increasing demand, the fallow or low productive lands will have to be put into use and the trend of more intensive, high-tech agriculture strongly continues out of sheer necessity.