Friday, September 28, 2007

Blame China for High Food Prices

Over the past year the price of a bushel of wheat has almost doubled, from $4.79 to $9.50. American wheat farmers are delighted with this state of affairs, along with seed and herbicide producers and manufacturers of farm equipment. The downside is that it comes at the expense of higher bread, pasta, and tortilla prices. The average retail price of a pound loaf of whole-wheat bread and milk in U.S. cities was up 24 and 26 percent respectively over a year ago.

Americans blame China for hazardous lead-laden products, an undervalued currency, rising military expenditures, pollution, and a host of other problems. To this list we can also blame China for higher food prices. China’s 10 percent annual real growth is transforming its population into a middle-class society. Several hundred million Chinese, members of the burgeoning middle class, no long make do with a bowl of rice, salt fish, and a sprig of vegetables. Like their counterparts in the West, they want meat and milk, whose production requires more grain to feed livestock. Soaring demand for milk has tripled China’s stock of dairy cattle over the past decade. Global wheat inventories are the lowest they have been since 1960, and global corn stocks are approaching their lows of the early 1970s.

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