Research paper
The situation at the food market in the world is rapidly changing under the influence of income growth, climate change, high energy prices, globalization and urbanization. In addition, the influence on the private sector, especially retail trade is growing. Worsening of the food supply, rising prices for agro-resource commodities, the changing nature of relations between producers and consumers seriously affect the poor populations in terms of food insecurity.
In recent years, many developing countries have high rates of economic growth. Thus, in recent years in Asian Developing Countries economic growth has averaged 9% a year, while in sub-Saharan Africa - about 6%. This is the main factor of changes in demand of the global food system. The rapid increase of welfare in low-income countries increases the demand for food. Another powerful factor influencing on the change in the global food balance is rural migration to the city, which leads to changes in consumer spending and preferences. It is expected that in the next three decades 61% of the world's population will live in cities. In developing countries, growth in incomes, urbanization and changing preferences lead to an increase in domestic consumer demand for expensive food. The structure of food consumption is shifting from cereals and other major crops to vegetables, fruit, meat, dairy products and fish. Demand for semi-finished and finished products is growing, especially in the cities. It is expected that these patterns of consumption will be secured. Of course, there are other factors that influence on the magnitude of demand, such as use of advertising, tastes of buyers, consumer expectations, availability of goods, number of population, etc.
Climate change may adversely affect the food production, complicating the challenge of meeting the growing global demand. Global warming is fraught with increasing risks of droughts, floods and inevitable losses in crops, and the implications for developing countries will be much more serious. Agricultural production in these countries may be reduced by 20% compared with 6% in industrialized countries. New technologies can not completely mitigate the consequences of these losses as well as to increase harvests so much as to meet the growing demand for food. The growing influence of international corporations also limits the ability of small agricultural producers in developing countries. If for some farmers were opened good prospects, many others could not be able to take advantage of new opportunities, as strict safety and quality standards set by the food industry and retail trade have become the barriers on their way to market. In the past two years, the turnover of food networks has increased. In 2010 – 2012 years overall global food costs increased by 16%. At the same time, sales of retail trade grew much stronger compared to the food industry and agro-resource companies - more than 40% of the largest companies of the retail trade and only 13% and 8%, respectively, in the other two sectors.
There are other factors that influence on supply of goods, such as the entry of new firms to the market, changes in prices of other goods leading to the output of the company from the industry, policy actions and war, perspective economic expectations, etc.
Supply and demand changes in the global food balance led to distortions in the market and to the sharp rise in prices. In 2006 - 2012 years the world demands for cereals increased by 8%, while prices have gone up by almost 50%. By the beginning of 2010, prices have more than doubled (compared with 2006). The supply is not elastic: in case of the rise in prices by 10%, it usually grows by 1-2%. Furthermore, the supply is reduced by the instability of prices on agricultural products, but it can be increased as a result of infrastructure improvements, access to technology and financing in rural areas. In recent years, grain consumption has consistently exceeded its production. This is not only due to the increased use of grains in the food industry and as a feed (from 2006 growth was 4% and 7, respectively), but also because of their application in industry, in particular for obtaining bio-fuels. However, the rise in prices cannot be explained only by the change of supply and demand. Increase in prices for agro-raw materials cause the growing interest of financial investors; and speculative transactions facilitate further market volatility. In 2008 the world's agricultural futures and options transactions grew by 30%. Commodities exchanges, developing in India, China and some African countries, will facilitate the improvement of the transparency and efficiency of food markets.
Recommendations for stable food balance in the world:
- Developed countries should provide flexible reaction to abrupt changes in prices, eliminating trade barriers and programs for reducing the use of agricultural resources, except for well-defined protected areas. In a situation of food scarcity they need to trade more, not less, to have equal access to food.
- Developing countries need to dramatically increase investment in rural infrastructure and in the development of market institutions, in order to reduce barriers for supply of agricultural raw materials and thereby contribute to the growth of production.
- Agricultural and food problems need to be considered along with the problems of climate change at the national and international level - this will effectively counter the potential risks and protect the poor population.
References
H. Charles J. Godfray1, Ian R. Crute, Lawrence Haddad, David Lawrence, James F. Muir, Nicholas Nisbett, Jules Pretty, Sherman Robinson, Camilla Toulmin and Rosalind Whiteley. (2010). The future of the global food system.
Ronald Trostle. (2008). Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices.
Factors that will be affecting the Demand and Supply of a given number of products. http://ru.scribd.com/doc/5552213/factors-that-will-be-affecting-the-Demand-and-Supply-of-a-given-number-of-products
