Asians by the millions are demanding better food. China's growing middle class is eating more beef, pork, and poultry than ever. Grain bins around the world are running low and commodity prices are soaring. Is this the start of an era marked by chronic food shortages and periodic famines?
There are good reasons for concern. Worldwide demand is surging far ahead of supply as protein-hungry people in developing nations upgrade their diets. Food prices will be higher in the coming decade, which will be painful for low-income people the world over, especially in the food importing countries of Africa and Asia. The everyday price volatility of agricultural commodity markets, dependent on such fickle factors as weather and speculators' whims, will increase, especially since stockpiles are smaller. Temporary price spikes will become more common and spur inflation fears in financial markets.
But don't push the panic button. The booming global demand for food stems from rising wealth in China and elsewhere in the developing world. Higher prices are also turning farming into a growth industry. Midwest farmers are seeing their efficiency rewarded on a global scale, and they will invest even more to increase agricultural productivity. Europe, Latin America, Australia, Canada, South Africa, and other breadbaskets of the world will find their output in demand on world markets. What's more, higher prices will entice farmers and entrepreneurs to open up new sources of supply.
Fact is, allowing the global markets to work is the best way to get consumers the food they want. For instance, America's new agriculture policy is the right move for the new economics of food. Farmers now have more flexibility to increase their output of farm products most in demand. So long as policymakers around the world resist the temptation to tamper with the booming international trade in food, agriculture will attract more investment, leading to bigger crops. And the weather gods permitting, bigger supplies will limit the rise in the price of food.