Food Prices in Agricultural Markets Essay Example | Topics and Well Written Essays - 3000 words

Food Prices in Agricultural Markets - Essay Example This research will begin with the statement that Ð µhe ever-rising food prices have brought a lot of challenges to the contemporary society. Most affected by these food price increases are the poor in the society. The main effect of the rising food prices on poor consumers is the reduction in their purchasing power. A number of economic theories and models have been put forward to explain the relationship between rising food prices and their impacts on poor consumers. Engle’s law and the standard demand theory are just some of these theories explaining the effects of rising food prices on poor consumers. According to Engel’s law consumers rely on non-food expenditures if food prices go up. Because the rich spend more money on non-food items, whenever food prices rise, they have excess non-food expenditures to cut and transfer to food expenditures. The standard demand theory on the other hand focuses on the effects of income and price increase on substitute food. The ne gative impacts of food price increase on poor consumers make it imperative that governments and the international community step in to provide for the welfare of the poor. To increase the purchasing power lost due to food price increase, safety net programmes such as food-for-work and cash transfers have been implemented in many countries. Due to certain barriers to the success of safety net programmes, other strategies such as local and international financial assistance and improved accessibility to land, seeds, farm animals, loans, and technical services have been applied in some countries. Introduction World over, people are often guarded against rising food prices, a trend considered as having a number of negative influences on people’s welfare, more so the poorest in society. In fact, rising food prices has been cited as one of the main factors that push the poor into starvation. Besides, rising food prices exert a lot of downward financial pressure on the poor while th e wealthiest in the society are never affected by these food price increases (Westhoff, P. 212). Since majority of the world’s population could be described as poor, rising food prices have thus further dampened the already crisis-prone global economy. However, recent times have realized the emergence of a school of thought, which raises the question of whether food price increases are inherently negative. For instance, increased food costs have been found to be beneficial to farmers, who are the sole providers of one of the most basic human needs, food (Westhoff, P. 212). The argument according to this school of thought is that if farmers do well because of increased food prices, then others will also benefit from the increased food prices in one way or another. The second argument put forward by the school of thought that rising food prices have positive implications is that, high food prices have pushed the agricultural industry to develop genetically modified foods that n ot only resist draught and other natural calamities but also pests and diseases. Additionally, foods have been developed and grown that can survive and do well is marginally fertile areas. In other words, these foods have been quite useful to developing countries in which larger percentages of population live in abject poverty. The increasing food prices have thus made the agricultural industry rather alert in the creation of sustainable food productions, more so in developing and the under-developed countries. This paper thus explores the effects of the rising food prices on poor consumers, focusing on the welfare of this category of consumers and the possible interventions to address these effects. Theories and Models of the Effects of Rising Food Prices Because of the positive and negative effects of rising food prices on poor consumers, heated debates on the exact effects of rising food prices have ensued. Several theories and models seeking to explain the impacts of