Reason For The Rising In Food Price In 2007 And The Solutions

Reason For The Rising In Food Price In 2007 And The Solutions

In 2007, the wheat price increased from US$167/ton in 2006 to US$368/ton, which is not affordable for most of the US citizens. However, after 2007, the wheat price was still increasing, but not decreasing. In fact, there are four main reasons that lead to the increase in price: increase in demand, emergence of biofuel, shutting alternative products that can be used as biofuel and the increase in oil price.

Within this several years, the population increased steadily. As there is an increase in population, more people needed to consume foods, especially the grains.   Once there is an increase in demand, according to the demand-supply law, we can know that there would have an increase in price.

Another reason for the increase in price is the emergence of biofuel. Since scientists found that biofuel can emit less carbon dioxide than the fossil fuels, US government was highly encouraged the local farmers to produce those crops that can be converted into biofuel, like soya beans and corns by subsiding them. Since after the implementation of subsidies, the farmers can earn a higher profit from growing corns and soya beans than from growing wheat, they would have an intention to use nearly all of the land to grow these crops. Such a shifting would lead to the decrease in food crops. As a result, the food prices would be elevated.

However, apart from the emergence of biofuel, the scientists also found that some other crops, like sugarcanes, can be more efficient than soya beans and corns. The same amount of sugarcanes can produce more energy.   Once the scientists found this result, the farmers found the government immediately and told that the shift of using sugarcanes would lead them to a drastically drop in profit. Because of this, instead of implementing a free-trade policy, US government decided to implement the protectionism – imposing a high tariff on the import sugarcanes. They believe that this can protect the farmers not to be invaded by the foreign...