Market Growth On World Food Prices


It has been seen for last few years that there is a continuous change in the food prices. In 2008 commodity prices of food went to highest level. There is also uncertainty in food market in different countries. In the upcoming years it is expected that prices on food will remain high and affect the markets of developing countries. Effective policies by the government of these countries regarding imports and exports will result in the growth if the emerging markets.

Emerging markets have shown tremendous growth opportunities during this period of economical problems for developed countries. These emerging markets show an important contribution to the adoption of new technologies and implementing new business ways. There is a combination of low income and high population results in GNP per capita of developing countries. Many people who are suffering from the hunger have to face problems because of the rise in food prices. People are unable to buy sufficient amount of food to have healthy life. Changes in policies and meeting the demands that are desired can cover up the problem.

This essay includes the importance of emerging market growth and rise in the commodity prices. It is discusses that the high global demand and a slow supply response particularly from Asia affect the food prices. For all the food commodities the prices went to the highest level due to the climate change, increase in population resulting more consumption and political and legal impacts. Increase in the demand for grain, maze and oilseed for fulfilling the needs of biofules is being highlighted. Forecasting is given on all the commodities of food prices and implications are mentioned related to economic, political and social caring for increase in food prices.

Emerging markets growth & commodity prices (food):

Emerging markets can be described as the market of those developing countries that have high expectation of growth. In those countries investments can be a high risk but can give a high return. The growth in emerging markets gives a major contribution in the rise of price. For the last few years it has been seen that commodities prices all over the world are unstable and is affecting the balance of trade.

There is a continuous rise seen in the price of the commodities like fuel, metals and food after 2002. It was because of the high global demand and a slow supply response particularly from Asia. For all the food commodities the prices went to the highest level in 2008.

“Currently, the increase in the average of the index for the first three months of 2008 compared to the same three months in 2007 stands at 53 percent. The continuing surge in prices is led by vegetable oils, which on average increased by more than 97 percent during the same period, followed by grains with 87 percent, dairy products with 58 percent and rice with 46 percent. Sugar and meat product prices also rose, but not to the same extent.” [accessed 4 January 2010]

There are certain factors which had played a significant role for the continuous change in world food prices. The quantity of those forces can be in many numbers and quality can be multifaceted. Factors like the supply and the demand are both included which act as driving forces in the rise of the food prices.

Demand Factors:

Commodities prices depend on the demands of the buyers. It is the prime force in determining what is produced and how much is produced. Due to the continuous rise in population demand also increases. In the agricultural commodities like sugar, maze, rice and oil demand has been increased and is affecting the price.

Demand for Biofuels: It has been seen that biofuel industry is currently using huge amount of grain and oilseed and this usage will continue to grow in future. There has been a tremendous increase in planting of oilseed, and biodiesel production and its usage is getting more popular. This will reduce the dependence on normal fuel. Due to this demand for the agricultural commodities like sugar, maize, cassava, oilseeds and palm oil, there will be increase in the prices. These commodities are now grown for producing biofuels and acting as raw materials for it.

“In 2009 the world produced 16 billion liters of biodiesel and 74 billion liters of ethanol. However this only represents about 1% of the total amount of crude oil used globally. It is forecast that we will see a 10% increase in biofuel production in 2010, some analysts are even predicting demand will double by 2015; demonstrating plenty of continuing support for the grain markets”. [Accessed 5 January 2010]

Increase in population: As the population increases demand also increases. Consumption of the food commodities varies from country to country. Developing countries like China and India have huge consumption which affect in increase of food prices. Moreover, when there is a large consumption then the demand has to be met otherwise food prices will keep on increasing.

“As Chinese and Indian incomes rise, the use of food, energy and raw materials will also continue to climb, says the report. China's economy has averaged a 9.5% growth rate. Last year, the country consumed 26% of the world's crude steel, 32% of its rice, 37% of cotton and 47% of cement. Experts say that soaring prices of various goods and consumables show the strains on the world's energy base and threaten food security in many other countries because of demands from India and China.” [Accessed 5 January 2010]

Supply Factors:

When there will be shortages of supply the food prices will climb to the highest level. There are certain forces which affect the supply side and bring difficulties for the emerging markets. Some of the forces affecting supplies are production, climate change rise in the price of fuel.

Production Quantity: Due to the less production there will be a shortage of supply. It mostly occurs due to the changes in policies of the countries. On the other hand increase in the prises of raw materials required for the production can result in less production. In these conditions supply will get disturb and food prices will rise.

Changes in Climate: Climate effect the supply in many ways. In the dry season there is a large need of water is needed to irrigate the rice and wheat crops. Agriculture totally depends on climate variability and weather conditions, such as heavy rain, floods and storms. Food production gets more success from a warmer climate, but on the other hand farmers have face challenges regarding floods and heat waves. Addition to this, water supply and soil moisture could make it less feasible to continue crop production in certain countries. That results in increasing the food prices.

Increase in Fuel prices: For last few years there has been a dramatic change in the prices of the fuels. This results in increasing the food prices. Fertilizers prices also increased which is affecting the energy sectors. Transportation cost for supplying has also increased and many countries are being affected because of this.

Other factors effecting food prices: There are some other factors which affect the food prices. Such as,

Financial Market: It gives out a way that allows people to buy and sell with the financial securities that includes stocks and bonds. Dealing with the commodities such as metals or agricultural goods with a low transaction cost.There are policies which are designed in such a way to make the agricultural market clear and valuable. In dealing with the agricultural market a wide range of financial instrument.

Dollar as a reserve currency: This factor had influence the rise in the food prices. Most of the dealings are done in US dollars. The value of dollar gives out the agricultural good which would increase the food prices. Countries like China and India when deals in dollars take in consideration the value of dollar.

Import and export: Import and export of agricultural goods the worldwide results in the growth of emerging markets. This activity will affect the food prices because of the policies made by the government with the involvement of private sectors. Duties are put on the import and exports of goods. Some policies are designed in such a way that gives high income. GDP of certain regions gets improved. There might be some restrictions which are to be faced in moving globally. Restrict on dealing with a specific country will result in increasing the food price.

Forecasting the rise in food prices:

Emerging markets are growing day by day due to which food prices are also rising. Prices for the food are keep on shifting for last few years and will not drop back to the previous levels. They are going to be at the higher level in nominal terms than in the past. This condition could be continue for the next 10 years, and will give a long term pressure to the governments in facing the food crisis. There are some expected impacts in the rise food prices which are discus below:

There was an increase in most commodity prices in the period 2007-08 and this is because of the potential deleterious effects of climate change on agriculture. This has highlighted the value and the quantity of the future food availability especially in developing countries. The projections indicate that there would be an increase of prices worldwide around 10% or more for all products by keeping the importance of future supplies. Due to this dramatic change GDP and GNP of many developing countries will get increase. There will also be a change in the per capita income.

It is being indicated in the figure below that there will be growth in crops and consumption. Comparing 2006-08 average, worldwide production of vegetable oils in 2018 is expected to be more than 40% greater while that of oilseeds, poultry, butter and whole milk powder is expected to be more than 30% greater that will affect the level of price. Prediction is given for the commodity production other then wheat and grains that there will be high increase of shifting from developed countries towards developing regions, especially among emerging countries and countries having middle level of income. In this shifting meat and dairy products will play a major role.(OECD-FAO 2009)

As the figure indicate that the growth in consumption of agricultural products is also expected to change the place. This would be seen in the developing countries due to the stronger population and rising incomes. Such as China and India having huge population expected to have a record breaking change in the food prices. Addition to this, oil meals which are used in developing countries will be almost 60% greater in 2018, while consumption of butter and poultry will be some 50% greater and that of vegetable oils will be about 40% larger.

As the production and consumption of a country gets change, prices on the food will also get change. Due to this there are certain problems to be faced. Importing and exporting should be well managed, suitable interest rates should be given and opportunities for earning should be introduced.

As the production and consumption of a country gets change, prices on the food will also get change. Due to this there are certain problems to be faced. Importing and exporting should be well managed, suitable interest rates should be given and opportunities for earning should be introduced.

Concentrations are given to the wheat prices and are projected to reach at high level but in a slow ratio. Coarse grain prices will be at the downward trend, but this will be till 2015 then United States need for maize-based ethanol reaches its higher level. For the upcoming years rice prices will slightly be more expensive as comparable to wheat. There will be rise in demand for vegetable oils for food purpose and to fuel the growing biodiesel sector. Prices of oilseeds, oilseed meal and vegetable oil will get increase but expected to be stable in some levels.

It has been forecasted that there growth in sugar consumption due to the less import in developing countries. The supply will be less because of the undergoing economic contraction. This could result in weaker sugar prices over the medium-term. This will be overcome if the demands are covered by significant supplies. Political issues will affect emerging markets regardless to imports and exports. Interest rates and relations between developing countries will result in increasing supplies of raw sugar by 2018. There will be refining costs which will affect supplies and prices of white sugar. Economical conditions of the countries will play vital role at this level.

Forecasting the changes in oil prices:

For the last few years there has been a continuous change in oil prices. It is predicted that Oil prices may break through $100 a barrel in early 2011. Private sector shows its role as a key of global growth. There will be an increase in demand for oil due to weather turned extreme at same time in US, UK and other parts of Europe.

As per some political and environmental reasons it is said that the Oil price is likely to reached average of $92 a barrel in 2010, that an incoming cold front and an improving economic outlook would put significant upward pressure on oil prices in the short-run. Some political and weather-related demand will help bring distillate inventories down to more normal levels.

As long as stocks stay high in respective countries, crude oil prices will likely struggle to rise significantly near-term without a more widespread improvement in economic fundamentals. The global economy has been improving for months, but the pace is gradual and a broad-based recovery is yet to arrive in oil sector.


It is to conclude that international agricultural markets are progressively becoming characterised by the emergence of non-traditional exporters that are exploiting their emerging comparative advantage in agricultural production.

Recent economic condition of the world effects the daily consumable products prices very adversely as the income fallen and sale reduces to critical levels, company hardly make the breakeven so that increase the prices in the market.

Political condition and war on terror effect the world global market as iraq contribute in the supply of oil in world oil market, but future stability of political condition will drag the oil price which will increase economic activity.

Most of the countries are out of this turmoil and other are lagging beside to come out. Future prices of consumer good will decrease as economy reaches recovery and then boom of the business cycle.

It is shown that trade will continue to deliver products where they have ready markets as exports expand over the next decade. But, butter and coarse grains exports from developing countries are expected to contract by 2018 compared to their averages during 2006-08. In contrast, a larger share of wheat, rice and especially oil meal exports will be delivered by developing countries. Interestingly, over the next ten years, under developing countries are expected to provide the fastest growth of value-added agricultural and food products such as beef, pork, poultry, butter, cheese, skim milk powder and whole milk powder, if not always the largest share of trade in all these products. Such actions will result in the growth of emerging markets and affect the food prices world wide.


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