Research Paper: Globalization of World Food Markets

Pages: 5 (1439 words)  ·  Bibliography Sources: 1+  ·  Level: College Junior  ·  Topic: Agriculture  ·  Buy This Paper

Globalization of world food markets has had a number of unintended consequences. Nations find themselves limited in their ability to avoid food shortages in the face of increased consumption elsewhere on earth. The poor all over the world are adversely affected by food price increases. The risks inherent in the globalization of food production have not yet been adequately addressed within the system, leading to the potential of further shocks in the future.

Global Food Markets

The idea of global food markets relatively new. The economic theory of comparative advantage gave rise to the idea that a country should only produce those goods in which it has a comparative advantage and use the income made from that production to purchase the remaining goods that it has. The result of this idea has been the rise of the global economy, and all commodities are impacted by this global trade. Food markets have emerged as one of the major commodity markets affected by global trade. Nations that cannot or do not produce enough food to meet their own needs have survived and even grown as food importers. Tied to this growth is the fact that economic expansion increases the purchasing power in many parts of the world has increased consumption per capita, so say nothing of population growth.

Global food markets function roughly in the form of perfect competition, meaning that there is equal information among all buyers and that the products are largely indistinguishable. There are substitute products, for example lentils can be substituted for white beans and tea for coffee. Prices are therefore set on the world market, and are driven by agricultural production, demand, the cost of inputs such as fuel and to a lesser extent the price and availability of substitutes. Demand is increasing, which has meant that in recent years when shocks occurred in either the price of inputs such as with the 2008 oil price run-up or when supply falls due to a decline in agricultural output, prices increase significantly. The problem can then be exacerbated as countries move to protect domestic food supplies with trade barriers.

There are several impacts of escalating food prices. The world's poor, for whom food costs are a significant component of spending, suffer the most as they must reduce their food consumption. In the wealthiest countries, food prices increase resulting in inflation if the cost increases are sustained. In other nations, governments find their budgets strained by the need to spend more on world markets to provide feed for their people. If the strain grows too great, as has been the case in Venezuela, the nation faces currency devaluation, which in turn reduces purchasing power and reduces food intake.

The Case for Increased Trade

Comparative advantage created global food markets, and it is the most powerful tool by which food price shocks can be alleviated. When nations use trade barriers to shore up their own food supplies, they lower the supply on the world market, which drives up the price and creates even worse shortages in other nations. If nations committed to greater free trade, the markets would be more liquid, and therefore less subject to these types of strongly negative price shocks. Prices would increase during times of shortage, but the impacts would be lower. Tariffs may alleviate problems domestically in the short run, but they also cause harm to the global market for food.

Food Security

The problem with comparative advantage is not that it fails to work -- it does work. The problem is that it convinces some nations to eschew food production. Through trade in food, populations grow rapidly in places that normally could not sustain much human life. Rapid population gains in desert landscapes like the American Southwest and the Arabian Peninsula are perhaps most emblematic of this problem. This commitment to surviving via the production of other goods and trading them for the means to buy food works as long as there is sufficient food to purchase. What the spring of 2008 indicated was that for the first time we are beginning to realize that there are constraints to this produce and trade strategy. The earth has limited capacity to produce, and when demand exceeds this capacity, the inevitable result will be starvation.

National food markets function in a similar fashion to global… [END OF PREVIEW]

Four Different Ordering Options:

?
Which Option Should I Choose?

1.  Buy the full, 5-page paper:  $28.88

or

2.  Buy + remove from all search engines
(Google, Yahoo, Bing) for 30 days:  $38.88

or

3.  Access all 175,000+ papers:  $41.97/mo

(Already a member?  Click to download the paper!)

or

4.  Let us write a NEW paper for you!

Ask Us to Write a New Paper
Most popular!

Globalization Myths and Threats Essay


Globalization and Food in Film Term Paper


Globalization Reaction Paper


Is Genetic Engineering a Solution to the Food Security Problem in Developing Countries? Term Paper


Globalization and the Impact to Democracy Essay


View 556 other related papers  >>

Cite This Research Paper:

APA Format

Globalization of World Food Markets.  (2010, July 16).  Retrieved May 20, 2019, from https://www.essaytown.com/subjects/paper/globalization-world-food-markets/321354

MLA Format

"Globalization of World Food Markets."  16 July 2010.  Web.  20 May 2019. <https://www.essaytown.com/subjects/paper/globalization-world-food-markets/321354>.

Chicago Format

"Globalization of World Food Markets."  Essaytown.com.  July 16, 2010.  Accessed May 20, 2019.
https://www.essaytown.com/subjects/paper/globalization-world-food-markets/321354.