The food revolution

Corn has soared 52% the past 12 months. Sugar’s up 60%. Soybeans have jumped 41%. And wheat costs 24% more than it did a year ago. The World Bank’s food index has soared 29% from its level last January and is just 3% below its 2008 peak. An above-average African harvest and a stable rice market have prevented the current food crisis from exceeding 2008

In the United States you’re paying about 6.8% more for that steak than you did a year ago, according to the Bureau of Labor Statistics. Fruits and veggies are up about 4.3%. In the U.S., the effect of higher food prices has been modest. U.S. consumers spend about 9% of their income on food, and another 3% for dining out. In many emerging markets, however, 50% or more of a family budget goes toward food — not because food is so expensive, but because income is so low. Kick up the price of wheat or rice or corn, and you’re spelling the difference between having two meals a day or one.

“For many people who spend two-thirds or three-quarters of their income on food, even small price increases disrupt normal routine,” says Hassan Zaman, lead economist for the World Bank in poverty reduction and equity. “They start sacrificing non-food items, such as clothing, and then start eating less.”

Because many emerging markets have high unemployment, one result is a large number of unemployed men desperate for ways to feed their families. When Mohamed Bouazizi set fire to himself in Tunisia in December, it wasn’t because he was yearning to vote. It was because he couldn’t feed his family and police had confiscated the fruits and vegetables he was trying to sell. By itself, the soaring cost of food didn’t cause the political unrest in the Middle East and elsewhere. Those tensions have been building for a long time. But higher food prices amplify those tensions. “It exposes the underlying inequalities and issues related to the standard of living that boil beneath the surface,” says Tony Crescenzi, portfolio manager at Pimco.

When food shortages loom, Malthusians come out of the woodwork. Thomas Malthus proposed that eventually, the world population will exceed the Earth’s ability to feed everyone. Dan Seiver, economist in the finance department of San Diego State University, nevertheless explains that “We’re capable of feeding people with better seed, reduced waste and improved technology.”

The Socialist Party