Food economics in one Argentine Lesson (Wall Street Journal)

Wall Street Journal published an article on how bad choices in Latin America are contributing to global food shortages. Russi’s war on Ukraine is one reason for a spike in food prices that now threatens some of the world’s most vulnerable populations. But it’s far from the only reason. In Argentina, it isn’t even the primary reason for soaring food costs. The first is the change in relative prices, i.e., wheat becoming more expensive relative to widgets because of a reduction in global supply. The second cause of higher food prices is broad-based inflation throughout an economy. The market is the cure for a change in relative prices; the more flexible economies are, the faster adjustments will be made. The cure for economywide inflation is to correct monetary, fiscal, and regulatory errors. Argentine politicians fail on both fronts. According to IFPRI, in its blog post, How will Russia’s invasion of Ukraine affect global food security, Russia’s share of world trade in barley was more than 14 percent and in wheat 24 percent. Ukraine’s 2018-20 share of trade in barley was12.6 percent, maize–15.3 percent, and in wheat at 10 percent. Nearly 50 percent of global trade in sunflower oil during the same period came from Ukraine.