Should we be bullish about food prices?
According to Tony Arthur at BNZ we should be. This is an essential issue for NZ as it determines where our Terms of Trade stays elevated – or whether it falls. In turn it determines our national income, given what we produce.
I agree with many of the factors he states (although he is a bit bullish on them) but I think he ignores factors around the long run elasticity of supply of food. So I thought I’d try a poll (my first one 🙂 ), and do a post based on discussing the dominant view later:
“Bullish” or “bearish” doesn’t quite cover it for me… I think that prices can only go up in the longer term, but in part that will be due to increased nationalisation of food production, as developing countries in particular fight to regain some semblance of food security. Admittedly my view is probably being overly influenced by this article I just read:
http://www.nytimes.com/2008/10/12/magazine/12policy-t.html?_r=1&ref=magazine&pagewanted=all&oref=slogin
“I think that prices can only go up in the longer term, but in part that will be due to increased nationalisation of food production, as developing countries in particular fight to regain some semblance of food security”
So a trade-off between security of supply and efficiency?
My issue would be – how do they nationalise it? If countries start to subsidise food production (further) in order to increase security of supply then it will be bad for food prices – and for us 😛