On Food Prices and Food Aid

Do poor developing countries benefit from low or high food prices? The answer depends on who is buying and who is selling. Years back when food prices where low, farmers from poor countries were the losers while non-farmers (e.g. city dwellers) were the gainers. The recent increases in food prices will likely have the opposite effect. In any case, in aggregate, these countries are still dependent on food aid. A column from the March 29th issue of The Economist discusses the issue of famine and food aid amid the hiking of food prices all over the world. The column focuses on supply of food and its distribution. However, equally important is the fact that the recent improvements in the balance of payments from soaring prices of commodities, such as oil and metals, have boosted incomes of commodity exporters, which are mainly poor developing countries. Certainly, the higher income from commodities will increase their importing power and lower the need for food aid.