Touch the Soil News #441
The Food and Agriculture Organization (FAO) is a division of the United Nations. The FAO sits on the pulse of world food. The FAO maintains a Food Price Index. The Index follows the fluctuations in food prices.
The flow of food to people only happens to the extent that there is money to facilitate the connection of supply and demand. The FAO Food Price index is the first warning signal that in a world organized around monetary mediums – price escalations can quickly overwhelm global resources (distribution and acquisition).
The efficiency of money to connect supply with demand falls far short. Hence, over the past 20 years there have been almost 1 billion starving people at any point in time. With the existing monetary mediums falling short (material lack of purchasing power by a couple of billion people or more), an upward price tremor can be as scary as the initial tremors of a volcano.
Last week, the FAO announced that the Food Price Index reflected international food commodity prices shot up 4.2 percent – the steepest increase in 4 years. This is what is called a “Food Tremor.”
For June, 2016, the actual index was 163.4. The index is pegged to the price of 5 commodity groups during the 2002-2004 time periods. The present number, 163.4 means that prices are 163.4 percent of what they were in 2002-2004 (see Info Graphic #1).
When there is a real food shortage due to production problems and the price spikes, the secondary limitation of purchasing power by most people can escalate the problem into the stratosphere. There is yet another problem. When basic commodity prices (what farmers receive) are at the 164 level, it puts farmers at risk to not be able to cover costs and sends the message to slow down growing food – the precursor to a food tremor evolving into an explosion.
Following is a video clip by an FAO executive as he talks about the Food Price Index and its recent rise: