Getting Real About Food Prices

The 2008 spike in world grain prices is widely recognised to have had serious impacts on food security and poverty, but these high grain prices are commonly described as low in historical terms - an inconsistency resulting from the use of advanced- and global-economy price indices in calculating real prices. This ignores the high share of food in poor people's expenditures and the indirect effects of income growth on expenditure patterns of rich consumers. Poor consumers have not experienced the same falls in real food prices and are more vulnerable to price shocks. Different price indices must be developed to take account of differences between consumer groups.