How Does Inflation Affect Food Prices?
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Because of the present global economic situation, inflation has become of the biggest things to worry about. In general, the overall rise in prices in an economy is called inflation. But it is not always necessary that there has to be a hike on prices in all goods and services traded in an economy. In has been seen that sometimes while there had been a rise in the fuel on the other time there had been a hike in the price of the imported goods, Sometimes on luxury products and sometimes on necessary products. But what affects the most is the rise in price of food products.
Food is the most important need of people, irrespective of nation. Therefore a hike in the price of food products, ‘food inflation’, affects a nation from every aspect.
Initially it was thought that food inflation only stuck the U.S. economy. But as time passed it started affecting the whole world and by 2014 it is suspected that the food inflation will upset the entire global economy.
Reasons behind Food Inflation:
- Dearth of Market Practice:
In the United States the price of food has started rising constantly at the present time. But what causes inflation to spread throughout the globe so rapidly is the deficit in both foreign and domestic market practice. According to the experts, this inflates food prices to the high levels.
- Rainfall:
Reduced rainfall in a country like India has helped prices increase because of poor crop production and so the result is inflation.
- Climate:
Climate plays the main role when it comes to harvest. But at the present time climate is not helping cultivation, generally leading to poor production of food crops.
If we look back to 2007 and 2008 we can really see how much prices have increased. 2008’s inflation was at a 30 year high and by December 2010 food prices hiked even more than it had in the year 2008, according to a report from the UN.
“Record oil prices and soaring consumer demand from the world economy, notably emerging in the middle class in Asia, were a great problem”, per a Reuters report.
Other Causes of Inflation:
- After oil prices rose so quickly, the price of the oil has been increasing in spite of having lower demand mostly in the U.S., which is world’s number one oil consumer. This automatically raises the price of fuel that is a must for the farmers to harvest and grow their grains.
- On the other hand the drought in the western part of America has also given boost to the inflation. At that time, the production of corn and soybeans had fallen drastically, leading to a higher cost of these staples.
- India has always held the top position for the production of rice. But a sudden diminished rainfall in India affected the production of rice and thereby leading to a high cost of rice.
Effect of Inflation:
The effect of global food inflation is a fact to be worried about. If there would have been inflation in luxurious products the impact world not that severe. The price hike of food, fuel, oil influences the entire economy. Due to inflation there had been a rise in prices of many vital commodities.
Other than that inflation affects the purchasing power, job market, and imports everywhere.
Due to inflation, the price of necessary commodities is experiencing a hike and the poor become poorer though higher food costs. The unemployment affects the market severely and the tax on imports also takes a rise. If it keeps on happening like this, by 2014 it is going to affect the world economy.
About Author: Ritu is a business finance specialist providing financing advice and assistance to small and medium sized businesses. To get more information on the topic of short term finance, go visit short-term business loan .
Category: Personal Finance
