United States 

Department 

of Agriculture 

www.ers.usda.gov 

A Report from the Economic Research Service

Abstract

World market prices for major food commodities such as grains and vegetable oils have 

risen sharply to historic highs of more than 60 percent above levels just 2 years ago. 

Many factors have contributed to the runup in food commodity prices. Some factors 

refl ect trends of slower growth in production and more rapid growth in demand that 

have contributed to a tightening of world balances of grains and oilseeds over the last 

decade. Recent factors that have further tightened world markets include increased global 

demand for biofuels feedstocks and adverse weather conditions in 2006 and 2007 in 

some major grain- and oilseed-producing areas. Other factors that have added to global 

food commodity price infl ation include the declining value of the U.S. dollar, rising 

energy prices, increasing agricultural costs of production, growing foreign exchange 

holdings by major food-importing countries, and policies adopted recently by some 

exporting and importing countries to mitigate their own food price infl ation. This report 

discusses these factors and illustrates how they have contributed to food commodity price 

increases.

Keywords: Agricultural prices, food prices, prices, supply, demand, global supply, 

global demand, food infl ation, energy prices

Acknowledgments

The report was improved by comments, questions, and suggestions, from Mike Dwyer of 

the Foreign Agricultural Service, Carol Goodloe of the Offi ce of the Chief Economists, 

Dave Stallings of the World Agricultural Outlook Board, and Joy Harwood of the Farm 

Service Agency. Special thanks go to Paul Westcott, Bill Coyle, and Janet Perry of the 

Economic Research Service for numerous substantive contributions and for helping 

incorporate reviewers’ comments on a compressed schedule. Cynthia Ray produced the 

fi nal report on a much shortened schedule.

Ronald Trostle

WRS-0801

May 2008

July 2008

(Revised)

Contents

Approved by USDA’s 

World Agricultural 

Outlook Board

Introduction . . . . . . . . . . . . .2

Long-Term Trends . . . . . . .5

Increased Meat 

Consumption Means Increased Demand for Grain 

and Protein Feeds . . . . . . .12

Developments Since 

2000. . . . . . . . . . . . . . . . . . .13

The Role of Biofuels . . . . .15

Further Developments . . .20

Policy Responses to Rising 

Food Prices. . . . . . . . . . . . .23

Implications for Food 

Security . . . . . . . . . . . . . . 25

Food Price Infl ation Impact 

on Social Unrest . . . . . . . . .27

Summary of Factors 

Contributing to Higher 

Food Prices. . . . . . . . . . . . .28

Prospects for the Future . .29

Global Agricultural Supply and 

Demand: Factors Contributing 

to the Recent Increase in Food 

Commodity Prices
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World market prices for major food commodities such as grains and vegetable oils have risen sharply to historic highs—more than 60 percent above 

levels just 2 years ago. Retail food prices in many countries have also risen in 

the last 2 years, raising concerns around the world.

No one factor has been the cause of the price runup in food commodity 

prices. Some factors refl ect underlying trends in supply and demand for 

agricultural commodities that began more than a decade ago. Other developments that have contributed to the price increase have occurred more 

recently. Some factors refl ect signifi cant structural changes in supply and 

demand relationships; others can be interpreted as short-term shocks to 

global supply and demand for agricultural products.

Figure 1 shows an index of monthly prices for food commodities, e.g., 

grains, vegetable oils, meats, seafood, sugar, bananas, and various other 

commodities that are the basis for human consumption of staple foods. 

Although prices, measured in nominal dollars, trended slightly downward 

between 1980 and 2002, there were several short periods (1980, 1983, 1988, 

and 1996) when prices did rise from the previous year. After 2001, prices 

began to rise slowly and by 2004 reached the level that they had been in the 

mid-1980s. In early 2006, commodity food prices began to rise more quickly. 

During the last 2 years, prices of these commodities rose sharply to a new 

high, more than 60 percent above what they were 2 years ago.

Figure 2 puts the evolution of the food commodity price index into broader 

perspective. Monthly price indices for wheat, rice, corn, and soybeans back 

to 1970 have been added to the index for food commodity prices. Wheat and 

rice account for much of the world food consumption of grains. Corn is used 

for both food and animal feed. Soybeans provide vegetable oil for human 

Introduction

Figure 1

Food commodity prices rose more than 60 percent in the last 2 years

Index: January 1992 = 100

Source: International Monetary Fund: International Financial Statistics.

1980 82 84 86 88 90 92 94 96 98 2000 02 04 06 08

50

100

150

200

Monthly

Food commodities

This revised report adds a timeline 

of factors behind rising food prices 

(see: “A Mix of Short- and Long 

Term Factors Are Contributing 

to Higher Food Prices” on page 

6), and new information and 

data on land use associated with 

the production of biofuels (see: 

“Update on Global Land Use in 

Biofuel Feedstock Production” on 

page 19). The new information on 

biofuel land use replaces fi gure 

22 in the original report. Several 

typographical and formatting 

errors have also been corrected. 
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consumption and protein feed for animals. Combined, the four crops account 

for a large share of the staple foods that are consumed globally. 

Two general patterns are especially signifi cant in fi gure 2. First, the index 

of average food commodity prices (data only available back to January of 

1980) closely tracks the prices of the four major crops (wheat, rice, corn, 

and soybeans), although in a somewhat dampened manner. Second, there 

have been periodic spikes in the prices of the four crops during the last 38 

years. Although some of the price spikes focused on only one of the crops, in 

general the prices of all four crops rise and recede in a similar pattern. This 

occurs because buyers can substitute among these or other commodities, 

whether for food use or animal feed use, and purchase whichever is cheaper. 

With the exception of the early 1970s, each period of rapidly rising prices 

was followed by a retreat back to their pre-spike level. 

The question on the minds of many consumers around the world is, “Will 

food prices drop again this time?” Or, stated another way, “Is the current 

price spike any different from those of the past, and if so, why?” 

Before we begin to explore the factors contributing to the most recent rise 

in food commodity prices, two more additions to the graph provide an even 

broader perspective on the current increase in food commodity prices.

Figure 3 charts the price index for food commodities along with an index for 

the average of all commodities and an index for crude oil. Although the food 

commodity index has risen more than 60 percent in the last 2 years, the index 

for all commodities has also risen 60 percent and the index for crude oil has 

risen even more. 

Since mid-1999, when all three indices were at about the same level (and 

were about where they had been 10 years earlier), food commodity prices 

have risen 98 percent (as of March 2008); the index for all commodities has 

Figure 2

Food commodity price spikes since 1970

Index: January 1992 = 100

Source: International Monetary Fund: International Financial Statistics.

1970 74 78 82 86 90 94 98 02 06

0

50

100

150

200

250

300

Quarterly

Wheat

Soybeans

Rice

Corn

Food commodity
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risen 286 percent; and the index for crude oil has risen 547 percent. In this 

perspective, the recent rise in food commodity prices might not seem so 

severe after all. However, because an increase in the price of food—a basic 

necessity—causes hardships for many lower income consumers around the 

world, food-price infl ation is socially and politically sensitive. That is why 

much of the world’s attention is now focused on the increase in food prices 

more so than on the more rapid increase in prices of other commodities.

Figure 3

Prices of many commodities rose

Index: January 1992 = 100

Source: International Monetary Fund: International Financial Statistics.

Monthly

1992 1994 1996 1998 2000 2002 2004 2006 2008

0

50

100

150

200

250

300

350

400

450

500

550

600

Oil

All commodities

Food commodities
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A number of long-term, slowly evolving trends have affected the global supply 

and demand for food commodities. The impact of these trends has been to slow 

growth in production and to strengthen demand. The resulting tightening of the 

global supply and demand balance has gradually put upward pressure on agricultural prices. Many of these long-term trends have been exacerbated by the 

more recent developments that have put additional upward pressure on world 

prices by further reducing supplies and increasing demand.

The annual growth rate in the production of aggregate grains and oilseeds 

has been slowing. Between 1970 and 1990, production rose an average 

2.2 percent per year. Since 1990, the growth rate has declined to about 1.3 

percent. USDA’s 10-year agricultural projections for U.S. and world agriculture see the rate declining to 1.2 percent per year between 2009 and 2017.1

Growth in productivity, measured in terms of average aggregate yield, has 

contributed much more to the growth in production globally than has expansion in the area planted to grains and oilseeds. Global aggregate yield growth 

averaged 2.0 percent per year between 1970-1990, but declined to 1.1 percent 

between 1990 and 2007. Yield growth is projected to continue declining over 

the next 10 years to less than 1.0 percent per year. 

The growth rate for area harvested has averaged only about 0.15 percent 

per year during the last 38 years. In USDA’s agricultural projections, crop 

prices do not decline much over the next decade. The continued higher prices 

provide the incentive for producers to respond by increasing the area allocated to crops during the coming decade. Some of this expanded area planted 

will come from land converted to cropland from non-cropland uses, such as 

pasture and forest. Area harvested will also increase as a result of more intensive use of existing cropland, generally from double-cropping and reduced 

fallow area.

Reduced agricultural research and development by governmental and international institutions may have contributed to the slowing growth in crop 

yields. Stable food prices during the last two decades have led to some 

complacency about global food concerns and to a reduction in R&D funding 

levels. Although private sector funding of research has grown, private sector 

research has generally focused on innovations that private companies could 

sell to producers. These have often been cost-reducing rather than yieldenhancing technological developments. Publicly-funded research might be 

more likely to focus on innovations that would increase yields and production, particularly in parts of the world where farmers are unable to pay royalties for new varieties of seeds.

1USDA’s 10-year agricultural projections are a Departmental consensus 

on a longrun scenario for the agricultural sector. The projections are not 

a USDA forecast of what the future 

will be, but instead are a description 

of what would be expected to happen 

with a continuation of current farm 

legislation and under very specifi c 

assumptions regarding the macroeconomy, trade policies, weather, 

and international developments. The 

projections provide a neutral backdrop, reference scenario that provides 

a point of departure for discussion of 

alternative farm sector outcomes that 

could result under different domestic 

or international assumptions. The projections referred to in this report were 

prepared in October through December 

2007 and refl ect a composite of model 

results and judgment-based analyses. 

See the documentation of the baseline 

process at 

http://www.ers.usda.gov/Briefi ng/

Baseline/ .

Long-Term Trends
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Other trends show an even longer history of gradually slowing production 

growth. 

• For decades, each year a small percentage of the world’s agricultural land 

has been converted to nonagricultural uses. 

• The ability to obtain more water for agricultural uses has gradually 

become more diffi cult, either because gravity-fl ow irrigation systems are 

A number of factors have contributed to the tight 

market conditions that set the stage for the sharp 

increase in food commodity prices since 2002. Some 

factors refl ect underlying trends in supply and demand 

for agricultural commodities that began more than a 

decade ago. Trends of more rapid expansion in demand 

and slower growth in production began in the 1990s, 

and contributed to declining global demand for stocks 

of grains and oilseeds since 2000. Then, rising crude 

oil prices and changing biofuel policies provided 

incentives to expand biofuel production in some countries. Also, since the early 2000s, the declining value 

of the dollar and the foreign accumulation of foreign 

exchange reserves (U.S. dollars) enabled some countries to increase food commodity imports, even as 

world prices denominated in dollars reached record 

highs. On the supply side, largely due to rising energy 

prices, production costs for most of the world’s farmers 

were increasing and, in 2006 and 2007 adverse weather 

in a number of countries reduced global production of 

grains and oilseeds.

Together, these factors resulted in declining global 

stock-to-use ratios for aggregate grains and oilseeds 

which, by 2007, fell to the lowest levels since 1970. 

Importers faced declining market supplies and many 

countries experienced politically sensitive increases in 

domestic food prices, leading some to contract aggressively for future imports, even at world record prices. 

Finally, in late 2007 and early 2008, various exporters 

of food commodities imposed restrictions on exports in 

an attempt to moderate domestic food price infl ation. 

These actions, combined with the already tight market 

conditions, set the stage for the further rapid increases 

in food prices in late 2007 and early 2008.

A Mix of Short- and Long-Term Factors Are Contributing to Higher Food Prices

Factors contributing to higher food commodity prices

Strong growth in demand based on:

Increasing population + Rapid economic growth + Rising per capita meat consumption

Slowing growth in agricultural production

Rapid expansion biofuels production

Dollar devaluation

Large foreign exchange reserves

Adverse weather

Exporter policies

Importer policies

Aggressive 

purchases by 

importers

Declining demand for stocks of food commodities

Escalating crude oil price

Rising farm production costs

Supply factors in blue

Demand factors in red

1996 1998 2000 2002 2004 2006 2007 2008
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more diffi cult and expensive to develop, or because irrigation wells have 

to be dug deeper as water tables decline. 

These factors are changing slowly and likely played a negligible role in the 

recent increase in world prices. Additionally, although climate change has 

increasingly become a concern, its impact on crop production is unclear.

The demand for agricultural commodities has also been affected by some 

long-term trends. Over the last decade, strong global growth in average 

income combined with rising population to increase the demand for food, 

particularly in developing countries. As per capita incomes rose, consumers 

in developing countries not only increased per capita consumption of staple 

foods, they also diversifi ed their diets to include more meat, dairy products, and vegetable oils, which in turn, amplifi ed the demand for grains and 

oilseeds.

Global economic growth has been strong since the late 1990s (fi g.5). For 

developing countries, growth has been quite strong since the early 1990s. 

Growth in Asia has been exceptionally strong for more than a decade. 

Unusually rapid economic growth in China and India, with nearly 40 percent 

of the world’s population, has provided a powerful and sustained stimulus to 

the demand for agricultural products.

Rapid economic growth in developing countries has also resulted in very 

rapid growth in the demand for energy for electricity and industrial uses, as 

well as for transportation fuel. The associated increase in petroleum use in 

developing countries has contributed to rapidly rising oil prices since 1999. 

The oil imports of China alone grew more than 21 percent per year from 194 

million barrels in 1996 to 1.37 billion barrels in 2006. 

Figure 4

Total world grain & oilseeds1

Production, yield, area harvested, population & per capita production

Index: 1970 = 100

1Total oilseeds = soybeans + rapeseed + sunflowers.

Source: USDA Agricultural Projections to 2017.

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

80

100

120

140

160

180

200

220

240

260

Production

Yield

Population

Per capita production

Area harvested

Exponential trend growth rates:

 

 1970-90 90-07 2009-17

Production 2.2 1.3 1.2

Yields 2.0 1.1 0.8

Area 0.15 0.14 0.39

Population 1.7 1.4 1.1

Per capita 0.56 0.11 0.02

production
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The world’s population growth rate has been trending down since before the 

1970s (fi g. 6). This declining trend applies to nearly all countries and regions 

of the world. However, the number of people on earth is still rising by about 

75 million (1.1 percent) per year. This rising population adds to the global 

demand for agricultural products and energy. The impact on demand is 

amplifi ed because the most rapid population growth rates tend to be in develFigure 5

Strong economic growth

Average real GDP growth rates

Percent

Source: USDA Agricultural Projections to 2017.

World Developed Developing China India United

States

0

2

4

6

8

10

12

1975-90

1990-2000

2000-07

1990-2000

World Developed Developing Middle

East

Africa Latin

America

USA

0

1

2

3

4

Figure 6

Population growth rates decline

But still high in developing countries

Percent (by period)

Source: USDA Agricultural Projections to 2017.

1975-90

2000-07
9

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oping countries. Many of these have rapidly rising incomes, again particularly important for agricultural demand due to diet-diversifi cation.

Figures 7-12 illustrate how the rapid increase in global demand for agricultural products is facilitated by growth in imports. Note that much of the 

demand growth comes from developing countries. 

Figure 7

Global soybean oil imports

Million metric tons

Source: USDA Agricultural Projections to 2017.

1European Union, former Soviet Union, and other Europe. 

2Asia excluding India and China.

3Includes Mexico. 

1990 1995 2000 2005

0

2

4

6

8

10

12

India

China

Other Asia2

N. Africa & M. East

Latin America3

EU, FSU, & OE1

Rest of world

1990 1995 2000 2005

0

5

10

15

20

25

30

35

Figure 8

Global rice imports

Million metric tons

Source: USDA Agricultural Projections to 2017.

1European Union, former Soviet Union, and other Europe. 

2Includes Mexico.

Other Asia

Other

EU, FSU, & OE1

N. Africa & M. East

Latin America2

Sub-Saharan Africa

Indonesia
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Figure 9

Global coarse grain imports

Million metric tons

Source: USDA Agricultural Projections to 2017.

1EU-27 excludes intra-trade after 2002, EU-15 intra-trade before 2003, Slovenia before 1992.

2Former Soviet Union and other Europe; prior to 1999, includes Czech Republic, Estonia, 

Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia.

1990 1995 2000 2005

0

30

60

90

120

150

FSU & OE2

East Asia

Latin America

Mexico

Africa & Middle East

China & HK EU−271

Other

Figure 10

Global soybean imports

Million metric tons

Source: USDA Agricultural Projections to 2017.

1Includes Mexico. 

2EU-27 excludes intra-trade after 2002, EU-15 intra-trade before 2003, 

Slovenia before 1992. 

1990 1995 2000 2005

0

10

20

30

40

50

60

70

80

Other

China & Hong Kong

N. Africa & M. East

Latin America1

East Asia

European Union2
11

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Figure 11

Pork imports1

Million metric tons

Source: USDA Agricultural Projections to 2017.

1Selected importers.

China & Hong Kong

1990 1995 2000 2005

0

1

2

3

4

United States

China & Hong Kong

Russia

East Asia

Mexico

Figure 12

Poultry imports1

Million metric tons

Source: USDA Agricultural Projections to 2017.

1Selected importers.

2EU-27 excludes intra-trade after 2002, EU-15 intra-trade before 2003, Slovenia before 1992.

European Union2

1990 1995 2000 2005

0

1

2

3

4

5

Other N. Africa 

& M. East Russia

East Asia

China & Hong Kong

Saudi Arabia

Mexico

European Union2
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Global consumption of meat has been growing much more rapidly than 

consumption of grains and oilseeds. Between 1985 and 1990, production of 

meat (beef, pork, chicken, and turkey) rose more than 3 percent per year. 

Since this was well above the world’s population growth rate of 1.7 percent 

per year, per capita consumption was able to climb by 1.4 percent per year. 

Although the average growth rates in production and per capita consumption 

of meat have declined somewhat since 1990, they are still well above the 

growth rates for aggregate use of grains and oilseeds.

As the demand for meat rises, the demand for grain and protein feeds used to 

produce the meat grows proportionally more quickly. Feed-to-meat conversion rates vary widely depending on the class of animal and the production 

practices used to produce the meat. The feed-to-product conversion factors 

below show an upper bound of how much the demand for feed increases for 

every 1-pound increase in meat consumed using the typical U.S. production 

system.

Feed-to-meat conversion rates

 Pounds of feed needed to 

 Class of animal produce 1 pound of meat

 Chicken 2.6

 Pork 6.5

 Beef 7.0

Source: Ephraim Leibtag, “Corn Prices Near Record High, But What About Food 

Costs?” In Amber Waves, February 2008. 

http://www.ers.usda.gov/AmberWaves/February08/Features/CornPrices.htm 

Index: 1971 = 100

Exponential trend growth rates:

 

 1975-90 90-07 2009-17

Production 2.2 2.5 2.1

Population 1.7 1.4 1.1

Percapita use 1.4 1.1 1.0

Figure 13

Global meat1

Production, per capita consumption, and population

Source: USDA Agricultural Projections to 2017.

Production

Per capita consumption

Population

1971 1976 1981 1986 1991 1996 2001 2006 2011 2016

50

100

150

200

250

300

350

400

1Total meat = beef + pork + chickens & turkeys.

Increased Meat Consumption Means 

Increased Demand for Grain and Protein 

Feeds
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As the new century began, the trends discussed above resulted in slowing 

growth in production and increasing growth in demand. At the same time, 

policy decisions in China led to a reduction of its grain stocks. And elsewhere, there were incentives for governments and the private sector to reduce 

stocks. Government-held buffer stocks were deemed to be less important 

after nearly two decades of low and stable food prices. For the private sector, 

the cost of holding stocks, use of “just-in-time” inventory management, and 

years of readily available global supplies provided incentives to reduce stock 

holding. Over the last decade, the shift toward more liberalized trade reduced 

trade barriers and facilitated trade, which in turn reduced the need for individual countries to hold stocks.

As a result of these factors, global consumption of aggregate grains and 

oilseeds exceeded production in 7 of the 8 years since 2000 (fi g. 14). And 

since 1999, the global stocks-to-use ratio for the aggregate of grains and 

oilseeds declined from about 30 percent to less than 15 percent currently—

the lowest level on record since 1970 (fi g. 15). The resulting low level of 

world stocks in 2007 has caused importing countries to become anxious 

about being able to obtain their future food needs. 

In 2000, the price of crude oil began to rise—slowly at fi rst (see fi g. 3). The 

underlying trends of rapid economic growth and demand for energy led to 

rapidly rising use of crude oil in developing countries.

Beginning in 2002, the U.S. dollar began to depreciate, fi rst against OECD 

country currencies, and later against many developing countries’ currencies. 

As the dollar lost value relative to the currency of an importing country, it 

reduced that country’s cost of importing. Since the United States is a major 

source of many agricultural commodities, foreign countries’ imports of 

commodities from the United States began to rise. This put upward pressure 

Developments Since 2000

Figure 14

Total world grain & oilseeds

Production and total use

Million metric tons

Source: USDA PS&D Database.

1970 1975 1980 1985 1990 1995 2000 2005

1,000

1,500

2,000

2,500

Production

Total use
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on U.S. prices for those commodities. Further, since the world price of major 

crops are typically denominated in U.S. dollars, the depreciation of the dollar 

also raises prices (measured in dollars).

Crude oil is also denominated in U.S. dollars, and the declining value of the 

dollar enabled importing countries to increase their oil imports. This increase 

in global demand for oil (in addition to the underlying trend resulting from 

rapid economic growth in developing countries) put additional upward pressure on the world price of crude oil, and in 2004 oil prices began to rise more 

rapidly than in prior years.

Figure 15

Total world grain & oilseeds

Stocks and stocks-to-use ratio

Million metric tons

Source: USDA PS&D Database.

Ending stocks

1970 1975 1980 1985 1990 1995 2000 2005

0

100

200

300

400

500

600

700

800

0

5

10

15

20

25

30

35

40

Stocks/use

Stocks/use (percent)

Figure 16

Value of U.S. dollar declines after 20021

Index values, 2000=100

Source: ERS International Macroeconomics Dataset.

1970 1975 1980 1985 1990 1995 2000 2005

60

70

80

90

100

110

120

130

1Real U.S. agricultural trade-weighted dollar exchange rate, using U.S. agricultural export 

weights, based on 192 countries.
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Biofuels have been produced and used in small amounts in several countries 

in recent decades. Production generally grew slowly until after the turn of 

the century. U.S. ethanol production began to rise more rapidly in 2003; EU 

biodiesel production began to increase more rapidly in 2005.

Brazil and the United States account for most of the world’s ethanol production. Brazil uses sugarcane as a feedstock, while the United States uses 

nearly all corn. A number of other countries have policy initiatives designed 

to increase ethanol production, but so far the total augmentation in production capacity has been small relative to the combined capacity of Brazil and 

the United States. In 2006, China reversed its decision to invest in facilities to produce more ethanol from grain. Given its food policies, China is 

now focusing on using cassava and sweet potatoes as feedstocks for future 

increases in ethanol production.

The European Union is the largest biodiesel producer, and rapeseed oil is its 

main feedstock. The EU has mandated that biofuels account for 10 percent 

of transportation fuel use by 2020. The EU cannot produce suffi cient rapeseed to fi ll the mandate and will have to import either some feedstocks for 

producing biodiesel, or some biodiesel. Russia and the Ukraine are increasing 

rapeseed production destined for export to the EU as rapeseed, rapeseed oil, 

and perhaps as biodiesel. Brazil and Argentina are using soybean oil as a 

feedstock to expand biodiesel production. Brazil’s biodiesel will mostly be 

produced in the Center West part of the country and will replace petrol-diesel 

traditionally trucked in from the coast. Most of Argentina’s biodiesel production is destined for the export market. Canada is expanding biodiesel production in the Prairie Provinces using rapeseed as the feedstock.

 The Role of Biofuels

Figure 17

Ethanol production

Mostly from grain feedstocks except for Brazil

Million gallons

Source: USDA Agricultural Projections to 2017.

0

5,000

10,000

15,000

20,000

25,000

30,000

USA

EU

Canada

China

Brazil (from sugarcane)

2004 2006 2008 2010 2012 2014 2016
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U.S. ethanol production began to expand rapidly in 2003. There were several 

incentives for expanding ethanol production: the increasing price of petroleum; concerns about the reliability of some traditional exporters; concerns 

about the pollution effects of methyl tertiary butyl ether (MTBE) and initial 

switching from MTBE to ethanol; and an environmental objective to increase 

the use of cleaner burning fuels. Without these developments, the increase in 

U.S. and world biofuels production would not have been nearly as great.

Corn used for ethanol rose from about 1 billion bushels in 2002/03 to a 

projected 3.1 billion bushels in the current (2007/08) crop year. With this 

increase, corn used for ethanol production now accounts for about 24 percent 

of total U.S. corn disappearance, up from 10 percent in 2002/03. This 

Figure 18

Biodiesel production

Million gallons

Source: USDA Agricultural Projections to 2017.

USA

Brazil

Argentina

Ukraine & Russia

Canada

2004 2006 2008 2010 2012 2014 2016

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

EU

Figure 19

U.S. corn use

Billion bushels

Source: USDA Agricultural Projections to 2017.

1Food, seed, and industrial less ethanol.

European Union2

1990 1995 2000 2005 2010 2015

0

2

4

6

8

10

12

14

16

Feed & residual eed & residual

Exports

FSI less ethanol1

Ethanol
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increase was facilitated because U.S. corn production rose in response to 

increased demand and prices, and, in general, other uses of U.S. corn (food, 

feed, non-ethanol industrial uses, and exports) did not decline. 

Figures 20 and 21 provide perspectives about the importance of grain used to 

produce ethanol relative to the total demand for grain used for all purposes 

over 1980-2002 and over the most recent 5 years. For both charts, average 

contributions to the markets, as well as marginal contributions to recent 

growth are discussed.

Figure 20

Global wheat and coarse grains use, 1980/81– 2002/03

U.S. ethanol accounted for 7 percent of historical global growth

Million metric tons

100%

 1980/81 85/86 90/91 95/96 2000/01

0

250

500

750

1,000

1,250

1,500

1,750

Total

Food and other nonfeed

 (except U.S. corn ethanol)

Feed

Crop year

49%

44%

7% U.S. corn ethanol

Note: Category’s share of the change in total use from 1980/81to 2002/03 shown at the right.

Source: USDA PS&D Database.

Figure 21

Global wheat and coarse grains use, 2002/03 – 2007/08

U.S. ethanol has accounted for 30 percent of recent global growth

Million metric tons

Note: Category’s share of the change in total use from 2002/03 to 2007/08 shown at the right.

Source: USDA PS&D Database.

Crop year

2002/03 03/04 04/05 05/06 06/07 07/08

0

250

500

750

1,000

1,250

1,500

1,750

Total

Feed

Food and other non-feed

(except U.S. corn ethanol)

U.S. corn ethanol

100%

44%

27%

30%
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Historically, the amount of grain used to produce ethanol has been a small 

percentage of the global total used for all purposes. Furthermore, during the 

1980s and 1990s, the increase in grain used to produce ethanol accounted for 

a small percentage of the total increase in demand. Between 1980 and 2002 

(before the more rapid growth in ethanol production in the United States 

began), the amount of corn used to produce ethanol in the United States 

rose by 24 million metric tons. During the same period, global feed use of 

wheat and coarse grains increased 144 million metric tons, and food and 

other non-feed uses (besides U.S. corn for ethanol) increased by 160 million 

tons. Of the total increase in the demand for wheat and coarse grains (corn, 

barley, sorghum, rye and oats), ethanol accounted for 7 percent, feed use for 

44, and food and other non-feed use, except for U.S. ethanol, for 49 percent. 

During this period, the strong growth in global demand for food and feed far 

surpassed the demand for industrial uses of grain. Biofuels was only one of 

several rising industrial uses of grain (fi g. 21).

Ethanol output increased rapidly after 2002, and from the perspective of 

global market changes from 2002 onward, provides a somewhat different 

picture. Between 2002 and 2007, the quantity of U.S. corn used to produce 

ethanol rose by 53 million metric tons. This accounted for 30 percent of the 

global growth in wheat and feed grains use. Feed use grew by 48 million tons 

and accounted for 27 percent of the increase in total use. Food and other nonfeed uses climbed 79 million tons and accounted for 44 percent of the global 

increase in wheat and coarse grains use.

The data suggest that while U.S. corn used for ethanol production had only 

a small effect on global markets in the 1980s and 1990s, the increase in U.S. 

ethanol production over the past 5 years and the related signifi cant changes 

in the structure of the U.S. corn market have had a more pronounced impact 

on the world’s supply and demand balance for total coarse grains recently. 

Importantly, since the United States is the world’s largest corn exporter, 

some of the higher prices resulting from increased U.S. demand has spilled 

over onto world markets.

Most feedstocks used to produce biofuels come from annual crop production. Perennial crops, such as oil palm and coconut, as well as previously used 

vegetable oils and fats, that are feedstocks for biodiesel are the primary exceptions. Use of crops for biofuel may divert some cropland away from producing 

crops used for food, feed, and non-biofuel industrial uses. However, in some 

cases, coproducts such as distiller’s grains (a byproduct when producing 

ethanol from corn) or soybean meal (a joint product in producing soybean oil 

from soybeans), continue to be available for food or feed use when biofuels are 

produced. Also, because global total area harvested is rising, increases in land 

used to produce biofuel feedstocks have not led to equivalent declines in area 

planted to traditional food and nonfood uses.

A rough estimate suggests that about 47.8 million acres were used to provide 

biofuel feedstocks in the 6 major producing countries in 2007 (see box). This 

would account for about 3-4 percent of arable land in these countries.
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Since the initial release of this report in May 2008, ERS 

has compiled additional information for estimating 2006/07 

land used for biofuel feedstock production in other countries 

for 2007, as well as fi nal data for updating estimates for the 

United States. These estimates cover the 6 major countries 

producing biofuel—either ethanol or biodiesel—together 

accounting for about 95 percent of global biofuel output in 

2007. Estimates of biofuel production for 2007 are combined 

with crop yields and feedstock-biofuel conversion factors for 

2006/07 crop years to derive implied harvested areas of the 

major feedstocks used in each country (see table). These estimates do not include land used for minor feedstocks in these 

countries, or biofuel feedstock production in other countries, 

such as Thailand, India, and Indonesia.

Despite rapid global expansion in biofuel production, total 

land cultivated in biofuel feedstocks amounted to about 47.8 

million acres in 2006/07, or 3-4 percent of arable land, in the 

top six producing countries.* The United States accounted for 

about 46 percent of the global total, followed by the EU and 

Brazil. Per acre biofuel yields (combining both crop yields 

and feedstock-biofuel conversion factors) in 2007 range 

from from 66 gallons for U.S. soybeans, to 140 gallons for 

EU rapeseed, to 403 gallons for U.S. corn, to 710 gallons 

for Brazilian sugarcane. With higher yields from sugarcane, 

Brazil produced about 76 percent more ethanol per acre of 

land in 2007 than the United States.

*Land used to produce biofuel feedstocks may also produce food or 

feed coproducts. Examples include distiller’s grains (produced when 

corn is converted to ethanol by the dry-mill method) and soybean 

meal (a joint product of processing of soybeans to produce soybean 

oil, a biodiesel feedstock). These calculations do not include deductions for the area equivalent of coproducts.

Update on Global Land Use in Biofuel Feedstock Production

Biofuel Production and Land Use by Major Producing Countries, 2006/07

Country Biofuel 

production3 Biofuel feedstocks4 Biofuel yield5 Implied feedstock area6 Arable land7

Ethanol Biodiesel Ethanol Biodiesel Ethanol Biodiesel

Ethanol BiodieselCountry totalArea Biofuel

share

Million gallons Gallons/acre Million acres Percent

Argentina -- 117 -- soy 

(100%)

-- 65 -- 1.8 1.8 70 2.5

Brazil 5,284 105 sugarcane 

(100%)

soy 

(66%)

710 65 7.4 1.1 8.5 146 5.8

Canada

159 27 corn

(70%)

-- 370 -- 0.3 -- 0.7 113 0.6

wheat

(30%)

-- 115 -- 0.4 -- -- -- --

China1

469 30 corn

(70%)

-- 215 -- 1.6 -- 2.4 354 0.7

wheat

(30%)

-- 185 -- 0.8 -- -- -- --

EU-27

488 1,480 wheat

(48%)

rape 

(64%)

182 140 1.3 6.8 12.3 281 4.4

sugarbeet 

(29%)

soy 

(16%)

550 60 0.3 3.9 -- -- --

United States2

6,485 509 corn

(98%)

soy 

(74%)

403 66 15.7 5.7 22.1 431 5.1

sorghum 

(2%)

146 -- 0.7 -- -- -- --

Totals 12,884 2,267 28.5 19.3 47.8 1,395 3.4

Note: When countries import/export feedstock for processing, calculations based on biofuel production overstate/understate feedstock 

area in that country. 

1China ethanol production for 2007 from USDA/FAS GAIN report. 2U.S. ethanol production for 2007 from Renewable Fuel Association (http://

www.ethanolrfa.org/). 3Unless otherwise noted, biofuel production data for 2007 are from FO Licht, various publications. 4Percentages indicate feedstock shares of ethanol or biodiesel production; 100 percent is assumed when shares of other feedstocks are small. 5Biofuel yields 

based on 2006/07 crop yields from the USDA PS&D database and biofuel conversion factors based on USDA estimates for the United States 

and various USDA/FAS GAIN reports for foreign countries. 6Implied area estimates are adjusted for share of biofuel production from the 

major feedstocks indicated. 7Arable land data are from FAO.
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Developments in 2004

In 2004, agricultural production costs began to rise, especially for energyrelated inputs such as fertilizer, fuel, and pesticides. Although there was a 

lag between the increase in petroleum prices and when farmers began to 

pay more for fertilizer, fertilizer prices have risen sharply. In the long run, 

farmers must cover their costs of production. Farm output prices will increase 

because of reductions in output, until production again becomes profi table, or 

because of offsetting price increases due to demand strength.

Developments in 2005/06

In early 2006, food commodity prices began to rise more rapidly than in previous 

years. This increase refl ected many diverse and not necessarily related factors.

During 2006, hedge funds, index funds, and sovereign wealth funds became 

more involved in agricultural commodity markets. The investors in these 

funds were not so much interested in agricultural commodities as they were 

in using commodities to diversify their fi nancial portfolios. The funds held 

an increasingly large percentage of open interest in the futures market for 

agricultural commodities, as well as of nonagricultural commodities such 

as metals and energy. These investors only had a fi nancial interest in the 

markets and did not intend to take delivery of the agricultural commodities. Indeed, it is likely that in general, neither the investors nor the fi nancial 

managers that directed the funds’ investments knew much about the fundamentals of agricultural commodity markets. It is unclear to what extent the 

effect these new investor interests had on prices and the underlying supply 

and demand relationships for agricultural products. However, computerized 

trend-following trading practices employed by many of these funds may have 

increased the short-term volatility of agricultural prices

The U.S. Energy Policy Act of 2005 mandated that renewable fuel use in 

gasoline reach 7.5 billion gallons by calendar year 2012. Additionally, the 

legislation did not provide liability protection for effects of methyl tertiary 

butyl ether (MTBE), an oxygenating gasoline additive that has been found 

to contaminate drinking water. As a result, blenders sharply reduced use of 

MTBE by May 2006 and switched to ethanol as a fuel additive.2

Adverse weather reduced crop production in some countries in 2006. Russia 

and Ukraine had yield losses due to drought. Australia was in the second year 

of a severe drought. South Africa also experienced drought. These droughts 

resulted in lower world production of grains and oilseeds, contributed to 

a further decline in the global stock-to-use ratio for aggregate grains and 

oilseeds, and contributed to rising prices. In September 2006, corn prices 

began a signifi cant rise to a new high. 

 2Paul Westcott, “U.S. Ethanol 

Expansion Driving Changes Throughout 

the Agricultural Sector,” Amber Waves, 

U.S. Department of Agriculture, 

Economic Research Service, September, 

2007.

Further Developments
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Figure 22

Total world grain and oilseeds1

Production, yield, and area harvested

Index: 1970=100

Source: USDA Agricultural Projections to 2017.

1Total oilseeds = soybeans + rapeseed + sunflowers.

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

80

100

120

140

160

180

200

220

240

260

Production

Yield

Area harvested

Developments in 2007 

In 2007, a number of adverse weather events affected yields across the globe, 

including: 

• Northern Europe had a dry spring and harvest-time fl oods.

• Southeast Europe experienced a drought.

• Ukraine and Russia experienced a second year of drought.

• A large area of the U.S. hard red winter wheat area had a late, hard, 

multi-day freeze that killed some of the crop and reduced yields over 

large areas.

• Canada’s summer growing season was hot and dry, resulting in lower 

yields for wheat, barley, and rapeseed.

• Northwest Africa experienced a drought in some of its major wheat- and 

barley-growing areas.

• Turkey had a drought that reduced yields in its nonirrigated production 

areas.

• Australia was in the third year of the worst multiyear drought in a 

century. Grain yields were very low and exports plummeted.

• Argentina had a late freeze followed by drought that reduced corn and 

barley yields.

The result of adverse weather in 2007 was a second consecutive drop in 

global average yields for grains and oilseeds (fi g. 22). In historical perspective, two sequential years of lower global yields occurred only three other 

times in the last 37 years. The lower production caused yet another decline 

in the global stocks-to-use ratio and created a world market environment 
22

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characterized by concern among importers about the future availability of 

supplies.

In May of 2007, soybean prices began a rapid upward trend. Corn prices 

were already at record highs.

By late summer 2007, some importers were aggressively contracting for 

imports of grains and oilseeds. Even though prices were at record highs, 

importers were buying larger volumes, not less. Some countries that usually 

imported suffi cient quantities of grain to meet their needs for the following 

3-4 months began to contract for imports to meet their needs for the 

following 5-10 months. 

Large foreign exchange reserves held by some major importing countries 

enabled them to contract for their import needs regardless of how high 

the world price rose. There have been very large accumulations of foreign 

exchange reserves held by oil-exporting countries (OPEC and Russia) and by 

countries with large non-oil trade surpluses (China, Japan, and other Asian 

countries). Countries holding these large foreign exchange reserves are able 

to import large volumes of food commodities in order to meet their consumption needs and allay their domestic food price infl ation. In essence, they can 

bid supplies away from other traditional importers that do not hold signifi cant 

foreign exchange reserves.

In August 2007, world wheat prices began a sharp upward trend. Rice prices 

jumped sharply later in the fall.

Figure 23

Foreign exchange reserves

0

200

400

600

800

1,000

1,200

1,400

1,600

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

$ billion

Emerging Asia excluding China

Source: Oxford Economics / Haver Analytics

China

OPEC Russia

Japan
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Policy Responses to Rising Food Prices

The rapidly increasing world prices for food grains, feed grains, oilseeds, 

and vegetable oils caused domestic food prices at the consumer level to rise 

in many countries. In response to rising food prices, some countries began to 

take protective policy measures designed to reduce the impact of rising world 

food commodity prices on their own consumers. However, such measures 

typically force greater adjustments and higher prices onto global markets.

In the fall of 2007, some exporting countries made policy changes designed 

to discourage exports so as to keep domestic production within the country. 

The objective was to increase domestic food supplies and restrain increases 

in food prices. A partial list of these policy changes follows:

Eliminated export subsidies:

• China eliminated rebates on value-added taxes on exported grains 

and grain products. The rebate was effectively an export subsidy that 

was eliminated.

Export taxes: 

• China, with food prices still rising after eliminating the value-added tax 

rebate, imposed an export tax on a similar list of grains and products. 

• Argentina raised export taxes on wheat, corn, soybeans, soybean 

meal, and soybean oil.

• Russia and Kazakhstan raised export taxes on wheat.

• Malaysia and Indonesia imposed export taxes on palm oil.

Export quantitative restrictions:

• Argentina restricted the volume of wheat that could be exported even 

before raising export taxes on grains. 

• Ukraine established quantitative restrictions on wheat exports.

• India and Vietnam put quantitative restrictions on rice exports. 

Export bans:

• Ukraine, Serbia, and India banned wheat exports.

• Egypt, Cambodia, Vietnam, and Indonesia banned rice exports. India, 

the world’s third largest rice exporter, banned exports of rice other 

than basmati, signifi cantly reducing global exportable supplies.

• Kazakhstan banned exports of oilseeds and vegetable oils.

Early in 2008, importing countries also began to take protective policy 

measures to combat rising food prices. Their objective was to make highcost imports available to consumers at lower prices. A partial list of policy 

changes follows:

The following countries reduced import tariffs: 

• India (wheat fl our)
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• Indonesia (soybeans and wheat; streamlined the process for importing wheat fl our)

• Serbia (wheat)

• Thailand (pork)

• EU (grains)

• Korea and Mongolia (various food commodities)

Subsidizing consumers:

• Some countries, including Morocco and Venezuela, buy food commodities at high world prices and subsidize their distribution to 

consumers.

Other decisions by importers: 

• Iran imported corn from the United States, something that has occurred rarely—only when they could not procure corn elsewhere at 

reasonable prices.

The policies adopted by importing countries also changed price relationships 

in world markets. Their policy changes increased the global demand for food 

commodities even when world prices were already rapidly escalating.

The policies adopted by exporting countries to reduce food price infl ation 

within their own countries resulted in lower supplies available to the rest of 

the world. Importers who want to buy food commodities now have fewer 

sources. This heightened concerns among importing countries, stimulating 

them to buy additional supplies, even at record high prices. The combination 

of reduced supplies and increased demand meant that world market adjustments had to be made by the smaller number of countries trading in the world 

market that had not changed their trade policies. 

The combination of reduced supplies from traditional exporters and increased 

demand from importers, at a time when the global stocks-to-use ratio was 

unusually low, increased importers’ concerns about future availabilities to 

meet consumption needs. This boosted world market prices even more. These 

contributions to higher world prices in April 2008 exacerbated an already 

tight supply and demand situation. 
25

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Implications for Food Security

Rising food commodity prices tend to negatively affect lower income 

consumers more than higher income consumers. First, lower income 

consumers spend a larger share of their income on food. Second, staple food 

commodities such as corn, wheat, rice, and soybeans account for a larger 

share of food expenditures in low-income families. Third, consumers in 

low-income, food-defi cit countries are vulnerable because they must rely on 

imported supplies, usually purchased at higher world prices. Fourth, countries receiving food aid donations based on fi xed budgets receive smaller 

quantities of food aid.

A number of factors affect how much of an increase in world food 

commodity prices passes through to consumers’ budgets: the percentage 

of income spent on food, the percentage of retail food expenditures spent 

on staple foods, government trade and domestic food policies. A simplifi ed 

comparison of the impact of higher food commodity prices on consumers in 

high-income countries and on consumers in low-income, food-defi cit countries illustrates these differences.

Impact of Higher Food Commodity Prices On Consumers’ 

Food Budgets*

 High-income Low-income 

 countries food-defi cit countries

I. Base scenario

 Income $40,000 $800

 Food expenditure $4,000 $400

 Food costs as % of income 10.0% 50%

 Disaggregate retail food spending 

 (staples vs. non-staples)

 Staples as % of total food spending 20% 70%

 Expenditures on staples $800 $280

 Expenditures on non-staples $3,200 $120

II. Scenario: 50% price increase in

staples, partial pass through on staples 

 Assumed % pass through 60% 60%

 Increase in cost of staples $240 $84

 New cost of staples $1040 $364

 New total food costs $4,240 $484

 Food costs as % of income 10.6% 60.5%

*These are illustrative food budgets that characterize the situations for consumers in high- and 

low-income countries.

Source: As compiled by ERS.

This illustrative comparison shows that for a consumer in a high-income 

country, a 50-percent increase in staple food prices causes retail food expenditures to rise 6 percent ($240). This results in the percentage of income 

spent on food rising from 10 to 10.6 percent—less than 1 percentage point. 

For a consumer in a typical low-income food-defi cit country, food expenditures increase only $84, but that is a 21-percent increase in total food expenditures. Furthermore, this $84 increase means that the percentage of income 

spent on food climbs from 50 to more than 60 percent.
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For highly import-dependent or highly food-insecure countries, any decline 

in import capacity stemming from rising food prices can have challenging 

food security implications. Foreign food aid donations have provided supplemental assistance to lower income consumers in many low-income, fooddefi cit countries. However, food aid donations have stagnated during the last 

two decades, and food aid’s share has declined relative to total food imports 

of low-income countries.3 Higher food commodity prices negatively affect 

the ability to provide food aid donations. Most food-aid donors budget a 

fi xed annual amount to fund procurement of food aid commodities. When 

prices rise, their fi xed budget buys less food to donate. Additionally, higher 

petroleum prices have been a major factor in the sharp increase in ocean 

freight rates. This further increases the cost of getting food aid donations to 

the recipient countries.

3Stacey Rosen and Shahla Shapouri, 

“Rising Food Prices Intensify Food 

Insecurity in Developing Countries,” 

Amber Waves, U.S. Department of 

Agriculture: Economic Research 

Service, February 2008.
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Food Price Infl ation Impact on 

Social Unrest

The recent price spike has led to social unrest in a number of countries.4

 Peaceful protests have been held in Malaysia (millers & bakers), Indonesia 

(markets selling soybeans and meats), and Pakistan (wheat marketers). 

Peruvian farmers blocked rail lines to protest rising fertilizer costs. In South 

Africa, members of the National Labor Federation demonstrated against 

higher food and electricity prices.

Less peaceful demonstrations of consumers’ anger and fear over higher food 

prices (generally referred to in the news media as riots) have occurred in a 

variety of countries including:

 Guinea Mauritania Morocco Senegal

 Cameroon Mexico Uzbekistan Yemen

 Niger Burkina Faso Egypt Haiti

 Ethiopia Philippines Thailand Mozambique 

 Ivory Coast Bangladesh Indonesia

Most of these incidents have occurred in low-income, food-defi cit countries.

 4Incidents gleaned from news media 

reports.
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Food prices, and particularly the prices for basic food commodities, have 

risen sharply during the last 2 years. Many factors contributed to these price 

increases. Long-term trends that led to slower growth in production and rapid 

growth in demand contributed to a sharp downward trend in world aggregate 

stocks of grains and oilseeds that began in 1999. Recent factors that have 

further tightened world markets include increased global demand for biofuels 

feedstocks and adverse weather conditions in 2006 and 2007 in some major 

grain- and oilseed-producing areas. 

Additional recent developments that have put upward pressure on food 

commodity prices by further restricting available supplies or increasing 

demand for food commodities include the devaluation of the U.S. dollar, 

rising energy prices, increases in agricultural costs of production, growth in 

foreign exchange holdings by major food-importing countries, and protective 

policies adopted by some exporting and importing countries. 

As a result of these market factors, stocks of grains and oilseeds in the world 

have fallen to levels that make the global aggregate stock-to-use ratio for 

grains and annual oilseeds the lowest since 1970. Stocks in major exporting 

countries are particularly low. All of these factors have contributed to higher 

world prices for food commodities.

Summary of Factors Contributing to 

Higher Food Prices
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Prospects for the Future

In assessing prospects for the future, there are a number of uncertainties 

and concerns:

Global economic growth: If rapid growth continues, particularly in 

developing countries, it will continue to put upward pressure on food 

commodity prices through increases in food demand.

Energy prices: If petroleum prices continue to rise, costs of agricultural 

production will rise, as will the cost of processing, and the cost of transporting products to markets both within a country and exporting to other 

countries. Continued high petroleum prices will also sustain the global 

incentives to produce more biofuels.

Biofuels production: Global growth in grains- and oilseeds-based 

biofuels production is expected to slow in the next several years from 

the rapid gains of the past several years, even with the higher mandates 

in the United States under the Energy Independence and Security Act of 

2007. This will lessen further demand pressures on agricultural markets 

and likely will result in some reductions in grain and oilseed prices. 

Nonetheless, with sustained higher levels of biofuels-related demand, 

world food commodity prices are not projected to retreat to past levels. 

However, several years into the future, the underlying long-term trend 

in rapidly increasing global demand is expected once again to be the 

primary contributor to future upward pressure on food commodity prices.

Supply response capacity of the global agricultural 

production system:

• Cost of inputs: Continued increases in production costs, especially 

in energy-related costs, will restrain the world’s production response. 

Higher costs for fertilizer, fuel, and seeds could cause farmers without access to credit to plant less than they otherwise would have, or 

to shift to crops requiring fewer inputs.

• Additional cropland (quantity and quality): What will be the longrun 

impact of higher world food commodity prices on the amount of land 

used to produce the crops? What is the productivity of the land that 

will be used to increase production?

• Water shortages: How quickly will constraints on the amount of 

water available for agricultural production become more widespread?

• New seed varieties and use of biotechnology: Will higher food prices 

encourage some countries to adopt the use of biotechnology, especially 

genetically modifi ed seed for crops? Will future research focus more 

on yield-enhancing varieties rather than cost-reducing innovations?

• Biophysical response to climate change: How will climate change 

affect agricultural production? How will it change temperatures, precipitation, the length of growing seasons, and variability of yields? 

How, and under what circumstances, will climate change increase 

and/or reduce production? In affected regions, how diffi cult will it 
30

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be for producers to shift to different crops, to adopt new cropping 

patterns, and to adjust production practices to the new environment?

With such low world stocks of food commodities, food prices are vulnerable 

to a production shortfall in one or more major production areas. If a signifi -

cant shortfall occurs this year due to weather or disease, food prices might 

continue to rise sharply from the current high level. Although trade fl ows can 

mitigate some of these effects, new or existing trade restrictions or barriers 

can exacerbate price impacts. However, if good crop production conditions 

exist in the Northern Hemisphere during the next 6 months, food commodity 

prices could retreat signifi cantly from their current highs.