For the past 25 years global food prices have been falling, driven by the increased productivity and output of the farm sector worldwide (Hill, 2013). One of the reasons why food prices are rising is because there has been an increase of demand. The increase demand on food consumption comes mostly from the rapidly developing nations such as China and India. Another reason why is because of bio-fuel subsidies and government policies. Biofuels refers to renewable fuels such as ethanol (an alcohol fermented from plant materials) and biodiesel
(Fuels made from vegetable oils and animal fats) that can substitute for petroleum-based fuels (Hill, 2013). In order to keep food prices under control both developed and developing countries have roles to play in this situation.
People who benefit from government policies to promote production of ethanol are families who own a lot of farmland and some who actually farm the farmland. There are some people who will not benefit and may harm those farmers who rent their land from absentee landlords (Bullock, 2013). Consumers also will suffer by paying more for corn as the demand for ethanol continues to increase. Brazil’s absolute advantage in the sugar cane production suffers from the policies to promote the production of ethanol and the tariff barriers placed on sugar cane imports. Sugar cane can also be used for biofuels, however due to the tariff barriers the price of sugar cane has increased and it can no longer compete with the subsidized corn and soy beans. The Poor are suffering worldwide as a result of these policies; unable to afford food (Hill, 2013).
One estimate suggests that if food prices rise by one-third, they will reduce living standards in rich countries by about 3 percent, but in very poor ones by about 20 percent. According to the International Food Policy Research Institute, unless there is a change in policies cereal prices will rise by 10...