Paper Example on Global Food Prices on a Sugar and Dairy

Introduction

The average price levels of a food substance on a global scale rely mainly on demand and supply. The prices levels and fluctuations which are contributed by the food industry come from food distribution, food marketing, and food production process. The reason for food prices fluctuations varies from excess supply, crop yield, food speculation activities, harvest failure and the food demand. This paper explored on the global food prices and affected about on sugar and dairy high products that mark the core food components in the market.

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Since both the sugar and dairy products are agricultural products commodities, their prices are influenced by the interaction of many other factors, which is not limited to the underlying aggregate of demand and supply. By the third quarter of year 2016, Financial Times produced an article that gives the significant details for the growth trend of food prices. According to the report, it is reasoned that the global food price index increases by 0.7% on a monthly basis and 9.1% on a yearly basis.

Since the farmers are the primary price takers, they live within the price that the market determines, depending on demand and supply. For example, when the costs of dairy products go up, the prices of cereal, eggs, pork, and chicken will also go up. Because of this, regardless of the variety of food products that are offered in the global market, their prices are tied up to some core natural food that combines meat, sugar, fruits/vegetables and grains.

The meat price affects the value other comedies such as that of poultry and that of seafood. This is because they do compete for the same market. Another factor that affects the meat price is the quality. The quality of meat that dictates the meat price is; juiciness, flavor, and tenderness. The customers' demand the quality meat has led to decrease in the costs. When the quality of meat being offered is low, then there will be a decline in the quantity of meat that is supplied. Hence affects the market price of that commodity. The decrease in the quality of meat has led to decrease in price, which is estimated to be 1% for the last one year, as per 2016 Financial Times article. From this, it can derive that apart from the supply and demand that are likely to affect the price fluctuation, other factors such as quality also determine the demand and price.

The production of grains, especially wheat, has increased in countries such as Kazakhstan and Russia. This is because of favorable weather conditions that facilitate the wheat production. The increased production has led to lowering the price of the wheat cereal products. Due to high production of wheat, the farmers have turned their attention from the corn grain production. This has led to decline in the quantity of the corn grain that, hence leading to the high price of the commodity. Shown in the diagram below, when the supply decrease from S1 to S2, then the price of the product increased from P1 to P2, this happens when the demand and quantity remains constant

The central supply regions for sugar are India and Brazil. There has been a decrease in sugar supply from these regions. This is due to urbanization, change in weather conditions and decrease of land for cultivation due to increased population. The decline in production has led to reducing in the supply of sugar. The prices as therefore rise by 3.4%. in the global sugar price according to Financial Times. Thus, when the supply of a commodity decreases, with demand remaining constant, then there is a likelihood of an increase in price.

Though the supply of dairy products has remained constant, the demands of the products are increased. This increase in demand with constant supply has resulted in the price increase. It can be concluded that when the demand for substances increases with the supply remaining constant, the price tends to increase. Hence the law and supply and demand affect the price too.

Conclusion

From the law of supply and demand, the low supply and high demand increase in price. On the other hand, when supply is higher and the demand is lower, then there is a high possibility of the price of that particular commodity falling (Agrawal, 2013). Demand and supply pull against each other until the equilibrium market price is reached. However, another factor such as the quality can affect demand and supply hence causing them to decrease or increase in various manners. These factors affect the global food prices, which mainly rely on the cost of sugar and dairy products which are the core food product in the market.

References

Agrawal, P. (2013). Managing Food Price Inflation: Demand Projections and Supply Considerations. Sustaining High Growth in India, 2(7), 55-84. doi:10.1017/9781316855584.004

Financial Times (2016), Global food prices on a sugar and dairy high, Available: https:// www.ft.com/content/3205d8e4-a72b-11e6-8898-79a99e2a4de6[Accessed: 26nd March, 2018]