World economy and pig cycle

Eliminates the "market" the food shortage?

According to neoclassical doctrine, it should actually work quite simply: increasing demand leads to a higher price, which in turn leads to an incentive for more production. In reality, however, only the first part of the model has worked like a textbook.

Investment in the food industry is actually increasing – partly because financial assets have been largely discredited by the banking crisis. Now a lot of speculators’ money is going into soy, corn, rice, wheat or sugar instead. The prices of the products listed in the index sp gsci agriculture total return listed agricultural products rose 45 percent in one year. With cocoa certificates, investors were able to record a price increase of more than 43 percent in 2008 alone; for wheat, this figure was 35 percent and for rice, 30 percent. Because speculators orient themselves only conditionally at the demand, but all the more at the behavior of other speculators, there is even the possibility of a "bubble formation".

In theory, the producers of such products should now receive the message that they should invest more because they can expect higher prices for their products. However, this is only happening to a very limited extent: in the rural areas of the third world, appropriately structured contracts ensure that only a very small part of the higher prices – if any – reaches many producers.

In addition, certain conditions must be fulfilled for consumers as well as producers, so that they can act in the sense of the neoclassical doctrine "rational" act: first, they must have some freedom of action – that is, their behavior must not be driven solely by immediate need. The extreme case of such unfree behavior is when farmers have to consume their livestock or seed in order not to starve to. But a currently much more frequent effect also falls into this category: because the prices of oil, gas and (the artificial dung produced to a large extent from these raw materials) rose even more sharply than food prices, many third-world farmers had to save on dung. It is therefore quite possible that the next harvests in these countries will be smaller than the current ones.

On the other hand, a prerequisite that is often ignored in pricing models determines the behavior quite considerably: the information. Even if producers see an increase in prices for their products, this does not mean that they can expect prices to rise in the future: many of them have experienced sharply falling prices for agricultural products in recent decades – partly due to dumping subsidized by the eu bureaucracy. Accordingly, these producers are likely to act cautiously before putting their capital (even if it is available) into long-term investments – such as the reclamation of new production land through irrigation.

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