Food Is The Cheapest It's Been In 4 Years, But It's Still Pretty Pricey

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Global food prices have fallen to their lowest level in four years – but at the same time, the number of hungry people in the world is now at 842 million, or 1 in every 8 people. So, what's going on?

The FAO released their latest data on the global food price index this week, where they detailed the rather sudden drop in food prices to their lowest levels over the past four years in every surveyed group of food — in cereals, dairy, vegetable oils, and sugars — except one: meat prices, which had actually experienced a rise in price.

So, if we're at the lowest level in every category but one, then why, at the same time, are we hearing increasing concerns over the issues of global hunger and food prices? The issue is two-fold.


First, most countries tend to spend a higher percentage of their income on food than Americans, who typically dedicate just under 10% of their income to food. And that percentage tends to be particularly high (in some cases absorbing almost half of a household income) in areas where much of the population lives in poverty.

With so much of the income dedicated to food, a drop in price equal to about 4% this last year doesn't make much of dent. Plus any shocks to the income — whether a drop in purchasing power or even a temporary loss — are reflected almost immediately in the amount and quality of food that is able to be purchased.


The second problem, though, becomes apparent when you step a little further back, and look at the pricing trends not just from the last few years, but from the last few decades. While it's true that food prices have fallen, when you compare them to where they were a decade ago, it turns out that the drop is actually not a drop at all. Take a look at the graph below charting the rise and fall of the food price index since 1961.

Global food prices increased dramatically beginning in 2005, and didn't stop their upwards climb until 2011. It's true that the most recent numbers are the lowest we've seen in some time, but even though prices are falling, it's still a lot more expensive than it used to be.


Graph: FAO

Top image: WindowsObservor