The December 8-14th edition of The Economist has an informative cover story about “The End of Cheap Food.”  Among many of the noteworthy points, the magazine’s “food-price index is now at its highest since it begin in 1845, having risen by one-third in the past year.”

Why is the cost of food escalating so fast?  Here are some of the reasons that are given:

One is increasing wealth in China and India.  This is stoking demand for meat in those countries, in turn boosting the demand for cereals, to feed to animals….China’s appetite for meet may be nearing saturation, but other countries are following behind….

Ethanol accounts for some of the rise in the prices of other crops and foods too.  Partly this is because of maize is fed to animals, which are now more expensive to raise.

Will supply rise to meet demand?  The article warns that, “there are limits to how much harvests can be expanded in the short term.”  In the longer run:

….plenty of new farmland could be ploughed up and many technological gains could be had.  But much of the new land is in remote parts of Brazil, Russia, Kazakhstan, the Congo and Sudan:  it would require big investments in roads and other infrastructure which could take decades—and would often lead to the clearing of precious forest.

So when food prices soar, who wins? Who loses?

According to the World Bank, 3 billion people live in rural areas in developing countries, of whom 2.5 billion are involved in farming. That 3 billion includes three-quarters of the world's poorest people. So in principle the poor overall should gain from higher farm incomes. In practice many will not. There are large numbers of people who lose more from higher food bills than they gain from higher farm incomes. Exactly how many varies widely from place to place.

Among the losers from higher food prices are big importers. Japan, Mexico and Saudi Arabia will have to spend more to buy their food. Perhaps they can afford it. More worryingly, some of the poorest places in Asia (Bangladesh and Nepal) and Africa (Benin and Niger) also face higher food bills. Developing countries as a whole will spend over $50 billion importing cereals this year, 10% more than last.

Rising prices will also hurt the most vulnerable of all. The World Food Programme, the main provider of emergency food aid, says the cost of its operations has increased by more than half in the past five years and will rise by another third in the next two. Food-aid flows have fallen to their lowest level since 1973.

In every country, the least well-off consumers are hardest hit when food prices rise. This is true in rich and poor countries alike but the scale in the latter is altogether different. As Gary Becker, a Nobel economics laureate at the University of Chicago, points out, if food prices rise by one-third, they will reduce living standards in rich countries by about 3%, but in very poor ones by over 20%.

Forty years ago, when Paul Ehrlich wrote, “The Population Bomb,” he focused on the possibility that population growth rates might lead to global famine. Declining fertility rates and rising agricultural productivity, thanks to the “Green Revolution,” defused the bomb.  Or so we thought. Now, with global population on track to grow by 40 percent over the next 40 years and agricultural productivity threatened by climate change, soil erosion, water scarcity, diversion of agricultural lands into biomass production, and the rising cost of fertilizers, one has to wonder:  Is there another "population bomb" looming on the horizon?  Stay tuned.