There may not be a food shortage, but food prices are definitely rising by the day. Food prices have more than doubled between 2004 and 2008. To make matters worse, fuel prices are on the same track. The question on the minds of many consumers is, "What is driving food prices up?" For them, the daily dilemma is choosing between buying food and buying gas.

Bridget Udoh, Ph.D., communications specialist at the Southern University Agricultural Research and Extension Center investigated the factors contributing to the recent rise in food prices. Surprisingly, there were several causes for the food and gas price increase.

What experts say about rising food prices

Some experts argue that changes in input costs affect food prices; while others dig deeper to explain the causes of the current trend in food prices.

According to the May 2008 report of the USDA Economic Research Service, "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 two years ago."

The factors attributed to the high food prices includes:

• slower growth in production and more rapid growth in demand. When demand is greater than supply, prices tend to increase
• increased global demand for biofuel feedstocks whereby food crops such as corn and soybeans in the US are used to produce biodiesel fuel. This in turn affects the prices of eggs, fresh fruits, vegetables and meats as farmers sacrifice them on the altar of ethanol producing crops
• adverse weather conditions in 2006 and 2007 in some major grain- and oilseed-producing areas
• declining value of the U.S. dollar in the global marketplace
• rising energy prices
• increasing agricultural costs of production
• growing foreign exchange holdings by major food-importing countries
• protective policies adopted by some exporting and importing countries to mitigate their own food price inflation.

These factors have contributed to higher global food prices. But, the greatest of them all is energy cost. There is a direct relationship between food and gas prices.

According to the ERS report, 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.

The question now is "does the low-income consumer buy food, fuel or medicine?" These are the choices that fixed income households, civil servants, the underemployed and unemployed have to make on a daily basis. In fact, rising food prices tend to negatively effect lower income consumers than higher income consumers because lower income consumers spend a larger share of their income on food.

What You Can do to Ease the Pain

As a solution, experts suggest you consider growing your own food, utilizing backyard space or containers. Fresh vegetables are easy to grow even with limited land space. Most vegetables like tomatoes, peppers, carrots, radishes, and lettuce perform well in containers. You should try container vegetable gardening if you have limited land space.

Other experts suggest smart money management when the going is tough by taking better care of your money. One way to have more money is to avoid excessive spending, experts say. For example, if you are just starting out on a job, consider living with family or friends to save money for a future home of your own or to ease the pain of pumping gas. Other ways to cut spending include avoiding "impulse spending" and just "spending to feel good," using a written budget to guide your spending habit, or even using the envelope system to categorize your expenses by placing the appropriate amount of money into a corresponding envelope. When the money runs out of an envelope, you wait for the next pay check. The envelope system forces you to implement your budget and save more money. Finally, work with your creditors by paying debts on time to obtain benefits such as low interest rates.

Adapted from USDA/ERS at: http://www.ers.usda.gov and Essence magazine, June 2008, Work and Wealth: Get Smart With Your Money, page 91.

# # #