Agflation
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Through Inflation, Food prices and Food security
Key features
- Agflation can be a starting point for the general inflation.
- Agflation creates additional pressure on a household income, reducing available money for other purposes.
- It is especially dangerous both for the poor countries and for the countries that are dependent on imported food.
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Reasons
Several reasons may cause agflation: structural (changes in the supply-demand balance), monetary (the result of loose monetary conditions or speculations), and external (climate change, natural disasters, etc.) Among them are:
- Growing population living on the same area of arable lands. Higher demand creates an upward trend in the prices for food.
- Emergence of biofuels has substantially changed the agriculture business, creating additional demand for certain crops.
- Climate change may decrease the area of arable lands, reducing food supply.
- Rising demand from emerging markets sends food prices upward.
- Devaluing United States dollar creates upward pressure on prices.
- Violent weather phenomena (droughts, floods, hurricanes) usually result in a reduction of food supply.
- Export limitations by governments of major food exporting countries push prices for certain food items higher.
- Excessive quantitative easing has created much new capital that chases the same amount of food.
- Food speculation by big players has recently become a substantial problem.
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