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Thursday, June 12, 2008

Factors that influences increase of the food prices

These days you hear a lot about the issue of food prices. Over the past few weeks the prices of rice, wheat and chickens meat have doubled or tripled.

How did this happen?

The answer is a combination of the impacts of emerging economies and bad policy. Let's start with the impacts of the growing number of people in emerging economies, i.e. China and India, who are, for the first time, rich enough to start eating more food like people in others developed country.

Increase in demand for food, means that production of foods by farmers in these emerging economies has to be increases. Increase in production, means increase in demand for oil. Modern farming is highly energy-intensive, a lot of energy goes into producing fertilizer, running tractors and, not least, transporting farm products to consumers. However, supply of oil is limited, especially after the invasion of Iraq which reduced oil supplies below what they would have been otherwise. The impact is that the price of oil increase.

With oil persistently above US$130 per barrel, energy costs have become a major factor driving up agricultural costs. Directly and indirectly, these rising economic powers of China and India are competing with the rest of us for scarce resources, including oil and other farm inputs, driving up prices for raw materials of all sorts.

Second, is the implementation of a bad policy. Like the Malaysia case, governments that have a policy like to control the market bear some responsibility for food shortages. I would like to discuss about chicken meat industry in Malaysia.

Besides taxing and subsidizing the production or sale of various goods, another way government can interfering the market is by controlling prices of certain goods and services. When government fixes the prices of a good or services, the free forces of market demand and supply no longer determine its price. The price is determined by government regulation.

At the equilibrium price, there will be no shortage or surplus. The equilibrium price, however, may not be the most desirable price. The government, therefore, may prefer to keep prices above or below the equilibrium price. If the government set a maximum price, this mean that the price is not allowed to rise above this level (although it is allowed to fall below it).

Government sets a maximum price to prevent the market price of product or services from rising above a certain level. This will normally be done for reasons of fairness. During inflation or festive seasons, the government may set maximum prices for basic goods so that poor people can afford to buy them. Maximum price is advantageous to the consumers because they can get the good at a lower price now. But is has some disadvantages. For example, the maximum prices reduce the quantity produced of an already scarce commodity. Artificially ceiling price of chicken is likely to reduce chicken supplies: if not immediately, then at the next harvest, because of less being produced by chicken growers/livestock farmers.

Some of the livestock farmers will left the industry if they find out that the ceiling price is much lower than the production cost. The cost of production can be escalated due to the global grain shortage, then increases the price of grain. We have experienced the situation like this in year 2000. When the government start to set a maximum price of chicken at RM5.40 per kg, many livestock farmers complained that the chicken price set by the government was too low. Many small livestock farmers left the industry. There are only 2,600 livestock farmers in year 2000, compare to 4,900 livestock farmers in 1994. Most of the livestock farmers that remain in the industry have their own grain factory, chick’s breeders and modern farming systems.

We should realized that cheap food, like cheap oil, may be a thing of the past.

13 comments:

Anonymous said...

i agree with u MR.Jamal...
so, we should take care about this problem..but with this situation i think we should think what should we will do next...
sorry with this sort comment bcoz i try to submitt the comments 3 times but i cant submitt it..so i try to make sort.
but i think ur blog is very good.
-ur student-

Anonymous said...

from Huang qi ling
when i read this aritcle, i do not know i feel better or not. i alway confus until now. from before two months, i found that the food price increase when i aet at Changlun, the price increase 50 cent each dish. also the universty incease the price, i even thought they focus on the international students, now, i understand a liiter bit. beacuse the price change, we often talk this topic and make the friends quarrel. its fun.
when the price change, who will resposible for this? must be governememt? this question stil need prove by professional. in China also. some studtents came back now, they also fond the price increase. why price can not keep stable? why resons make become this? we still need continues......tommorrow!

Anonymous said...

Siti
800659

For the case of increasing food price, i think we need to take a diet. (Just joking).
Maybe we can replace our meal from eating chickens meat to seafood.
I think many people are high ability to buy fish compare to chicken.

Anonymous said...

This article is a useful resource for teaching and learning of form six economics.Students are able to show the impact of ceiling price graphically and explain from the graph the quantity demanded and supplied for livestock as well as the "area" of excess demand. Thus it enhance the understanding of the theory of ceiling price when market mechanisme fails.
For economic students, learning of economics is interesting and meaningful when they are able to "see" and "feel" how theories from books are related with our daily life.
We appreciate articles of this kind as it enables us to bring current issues in the Malaysian economy into our classroom situation!

Regards,
Economic Teacher
SMK Green Road,
Kuching
Sarawak

Anonymous said...

Harga minyak kita jauh lebih murah dari negara jiran, Singapura, Thailand dan juga beberapa negara lain. Jangan bandingkan harga kita dengan negara jiran yang bukannya pengeluar minyak. Bandingkanlah harga kita dengan negara pengeluar minyak lain (Iran(0.35), UAE (1.19), Arab Saudi (0.38), Venezuela (0.16), Mesir (1.03), Bahrain (0.87), Qatar (0.68) , Kuwait (0.67), Nigeria (0.32) dll). Jangan fikir rakyat Malaysia bodoh dan mudah diperdayakan dengan fakta dan perbandingan yang tidak tepat.
Rakyat digesa ubah cara hidup. Kita disuruh ubah, tapi pemimpin semuanya masih berkereta mewah. Kerajaan sepatutnya ubah cara berbelanja. Tangguhkan dulu projek mega. Tukar semua kereta mewah kepada Proton Perdana. Barulah cakap serupa bikin.

One more extraordinary Student from SMK Green Road
Malaysia Boleh !

Anonymous said...

The best person to blame in the price increase for food MUST be government !

When I mean MUST , it means IT MUST BE blamed !

Apabila harga minyak naik, tentulah rakyat perlu mengisi kuantiti minyak yang sama untuk memaksimakan kepuasan kereta. Tetapi Kuantiti yang sama tetapi harga yang berbeza ! Sebagai contoh sebuah kereta lori memerlukan RM80 untuk seminggu dulu bagi dapat full tank 41.88 liter. Namun sekarang RM 80 hanya dapat 28.77 liter. Jadi masih perlu 13.11 liter jadi perlu lagi RM2.78 x 13.11liter =RM 36.44

Jadi satu minggu perlu berbelanja lebih RM 36.44
Satu Bulan berbelanja lebih RM 36.44 x 4 = 145.76
Satu tahun berbelanja lebih RM 145.76 x 12 bulan = RM 1749.12 !

Aduhai Aduhai, kononya dapat subsidi dari Kerajaan semasa rebat tunai Rm 625 bagi kereta kurang dari 2000cc ? jadi lori dapat berapa rebat ? RM 625 ? RM xxx ?

Jadi harga minyak yang dikenakan tentulah dikembalikan/ “give back to” customers !
Dulu RM 2.20 dapat makan kolok mee. Lama kelamaan RM 2.50.. Sekarang RM. 2.70 di SARAWAK !

Harga naik. Kerajaan cakap rebat. Harga Kolok mee naik tiada rebat ? Ayah Emak Uncle Auntie semua pekerja tiada gaji lebih makan apa ? maggi mee !~ kerana kerajaan cakap perlu berjimat cermat. Jangan memboros. Saya memang angkat tangan, angkat kaki, angkat kepala, saya memang AGREE !

Cubalah ahli menteri menteri pergi pasar beli sayur, guna minyak kereta bayaran sendiri tanpa subsidi kerajaan, tahulah mereka kesengsaraan/ kehidupan kita rakyat di Malaysia.
Kononnya lagi, kerajaan memotong elaun pelancongan ! apa itu ? sebagai alat untuk memikat hati rakyat untuk lihat kerajinan dan kesusahan menteri selepas tolak 10% elaun PELANCONGAN dan bukannya GAJI ?

Cubalah Petronas terangkan apa maksudnya jika terus subsidi petrol maka mereka akan susah !? Saya ingin mengatakan bahawa bagaimana kerajaan menggunakan wang rakyat.
1. mengguna duit rakyat untuk pergi ke angkasa dengan buat eksperimen gasing/ the tarik ? selepas itu balik ke Malaysia jual buku ? dan ingin pergi space lagi ? apa kata kali ini buat eksperimen buat Mee Mamak atau Rojak ? Apakah yang ingin Kerajaan prove to the rakyat ? prove kepada rakyat bahawa Malaysia Boleh pergi ke angkasa lepas ? atau boleh buang duit sesuka hati ? Kenapa tidak kerajaan gunakan wang yang berbillion itu untuk beri subsidi minyak ? elaun ibu tunggal ?
2. saya mendapati bahawa duit yang kita bayar selalu digunakan untuk membina jalan raya yang “sudah dibina” ? Bagi rakyat tahu bahawa Malaysia Boleh Buat Jalan ? atau itu Jalan Yang Digunakan Oleh Menteri Baru Diperbaiki ? Jika jalan yang perlu diperbaiki tidak diperbaiki itu memanglah salah, dan sebaliknya !
3. satu lagi fenomena ialah menanam rumput di tepi jalan dan mengakibatkan jalan raya menjadi sempit kerana ruang digunakan untuk “menanam rumput” untuk mengatasi Kesan rumah Hijau ? Hal ini menyebabkan kesesakan lalu lintas dan menyebabkan kerajaan “mengupah” pekerja untuk memotong rumput ?
mengatakan “belilah barangan buatan malaysia’ tetapi membeli kereta BMW/ Mercedez yang makan minyak.


Walaupun Bahasa Malaysia yang teruk tetapi itu memang hakikatnya !

Student of the Sekolah wannabe Bestari !

Anonymous said...

PTT

Population growth, urbanization and rising per capital income have fueled the massive increase in the demand for foodstuff. The article has highlighted that ceiling price imposed by government though lowered the price of chicken, has distorted free market mechanism, resulting excess demand. In view of this, productive subsidies should be emphasized and given priority in government expenditure. Direct subsidies to subsidize the purchase of better breed, seed, machinery, fishing boats, tractors and agriculture infrastructure will lower production cost and lead to increase in supply. Under the forces of free market mechanism, this will lead to lower equilibrium market price. Thus it not only boosts production but also cools the inflationary surge that Malaysia is undergoing. For those involved in the primary industry, lower production cost and larger output also mean higher income.
Malaysia on her way towards “excellence” (so called Gemilang) has carried out numerous ambitious projects. Among them is the sending of astronaut to space. I strongly agreed with the writer’s view that the feasibility of such project is questionable. Ambitious project of this kind have squeezed the country budget, drained our scarce resource and posed an increasing burden on tax payers.
The link between economic growth and human welfare must be understood- economic growth is the means to this end. The ultimate goal of economic growth is to enrich human lives. Should we launch projects in the outer space when on earth our economic system has yet to provide her people with enough foodstuff – the fundamental basic human needs!

Anonymous said...

MASALAH yang dihadapi negara sekarang adalah (i)sikap kerajaan tidak mahu mengaku kalah dan salah dan terus melakukan kesilapan yg lucu serta (ii)sikap kerajaan yg tidak memandang serious and like to wait masalah timbul dan barulah kita sama-sama fikir cara penyelesaian..

contohnya untuk point(i):
Projet menghantar anakasawan pertama Malaysia ke angkasa lepas untuk tujuan untuk belagak pandai, main gasing yg terapung-apung serta makan jeli yg berterbangan di udara sememangnya satu projet yg lucu jika dipandang oleh negara jiran.. perbelanjaan projet ini memakan lebih drpd rm30juta iaitu sama dgn(30000000/2.70=11111111.11liter petrol). Wang tersebut sepatutnya digunakan untuk tujuan yg lebih baik dari segi pembangunan negara.. projet tersebut ternyata satu projet pembaziran dan dikritik teruk oleh pelbagai pihak malah kerajaan masih cuba mempertahankan diri dan mengatakan ia satu kerjayaan besar dan telah membantu dalam pembangun sains di malaysia.Itulah sikap kerajaan kita yg begitu kuat egonya dan sampai bila-bila pun tidak akan mengaku salah dan kalah serta meminta maaf terhadap rakyat.

contoh untuk point(ii):
sebenarnya terlalu banyak contoh yg ingin disebutkan maka, contoh ini lebih sesuai bagi topic krisis makanan.. Iaitu, krisis kekurangan makanan yg dihadapi sedunia turut meberi kesan yg besar terhadap malaysia krn negara in bergantung kpd pengimportan makanan. tetapi pd hari ini beras kian berkurang dan harga beras import kian meningkat malah negara semakin merasai ketidakseimbangan ekonomi maka kerajaan barulah terfikir bahawa di sebelah kanan ataupun sebelah timur mereka masih ada sebuah negeri terbiar bernama sarawak yg masih dimiliki oleh malaysia yg negeri itu bukan saja mempunyai petroleum, kayu balak malahan ia juga ada tanah yg luas dan sebesar satu semenanjung memang sesuai utk penanaman padi secara besar-besaran. Kenapa ini tidak dilaksanakan awal-awal lagi dan terus membiarkan tanah di sarawak diselaputi hutan belukar, kalaulah ia dilakukan awal-awal lagi maka masalah kekurangan makanan serta peningkatan harga makanan dpt dibendung dan kesannay tidak seteruk seperti yg dihadapi sekarang. takkan kerajaan kita tidak faham bahawa pencegahan is better than pembaikian?? Itulah kerajaan yg kononnya bijak, cekap dan pandai.

LCH,
student frm sch of green.
MALAYSIA BOLEH!

Anonymous said...

Hi! Dr Jamal:
saya bersetuju dengan pendapat Dr. tentang kesan pertumbuhan ekonomi di negara China dan India terhadap kenaikan harga minyak. Seperti yang kita ketahui,kenaikan harga minyak dan harga makanan adalah saling berkaitan.
Baru- baru ini, saya mendapati bahawa 30% daripada jumlah bekalan beras dalam negara merupakan beras import; 70% daripada daging lembu dan daging kambing juga diimport dari luar negeri. Statistik menunjukkan bahawa isu kekurangan makanan kian menjadi-jadi sehingga kerajaan terpaksa mengimport makanan untuk memenuhi keperluan rakyat!
DC
6A1, Kuching.

Anonymous said...

Assalamualaikum w.b.t.
(101371)

Berkaitan dengan isu Kesan Ekonomi Disebabkan Kenaikan Harga Minyak yang terdapat di blog DR sangat menarik untuk dibahaskan ketika ini. Seluruh warga Malaysia juga turut bercakap tentang isu yang sama. Saya setuju dan mengakui bahawa kenaikan harga minyak telah menyebabkan banyak pihak terutama dari kalangan rakyat terpaksa menanggung beban kenaikan tersebut. Tetapi kita tidak boleh menunding jari kepada kerajaan atau pihak Syarikat Petronas kerana kenaikan ini. Menurut Presiden Petronas, kenaikan harga minyak di seluruh dunia telah member keuntungan yang agak besar kepada syarikat ini. Namun bukanlah bertujuan untuk mengaut keuntungan semata-mata. Perlu kita fikirkan di sini bahawa kos untuk Petronas sendiri bagi menjalankan operasinya juga meningkat dengan banyak. Di samping itu peruntukan yang besar diperlukan bagi menjalankan penyelidikan dan kajian ke atas penemuan-penemuan dan kajian baru berkaitan industri ini. Kepentingannya adalah berbalik kepada rakyat dan negara kita sendiri.
Dengan kesedaran rakyat dan pengguna, sikap berjimat cermat dan mengutamakan kepentingan daripada kehendak dapat membantu mengurangkan beban hasil kenaikan harga minyak di Negara ini. Mungkin lebih baik membiasakan diri untuk ke tempat kerja mahupun belajar dengan menggunakan perkhidmatan awam bagi menjimatkan kos pengangkutan harian.

Anonymous said...

Assalamualaikum w.b.t.
(101371)

Regarding to the topic of Economics Programmed in Malaysian University, I think providing more practical classes is truly important than theoretical classes only. In order to generate better economic-educated graduates, this matter should be highlighted and managed properly by the universities which providing economics and business studies. The existence of Islamic economics concepts and approaches has created very reliable, suitable and manageable economics applications especially for the countries. Thus graduates should know better on these Islamic economies because it is really helped and wide up the scope of thinking and analyzing economic conditions in such a company or even for the country.

Anonymous said...

Ekonomi sekarang semakin memperlihatkan ketidakstabilan yang menglampau. Sehingga ahli-ahli ekonomi sendiri tidak dapat menjangka apa yang akan tejadi dalam ekonomi dunia. Kenaikkan harga minyak amat mendatangkan masalah kepada semua individu terutama yang berpendapatan rendah. Segala perbelanjaan telah bertambah. Ini kita boleh lihat dari konteks kekeluargaan. Jika dilihat pula dari konteks Negara, telah mewujudkan ketidakamanan dalam Negara. Ini dapat dilihat di Negara Indonesia, dimana para palajar membuat satu tunjuk perasaan untuk membantah dalam peningkatan harga minyak. Ini telah mewujudkan satu keadaan yang tidak baik.
Polisi kerajaan dalm penentuan harga barangan adalah untuk meringankan beban bagi pengguna. Terutama apabila menetapkan harga syiling bagi sesuatu harga barang. Kesan pada para pengeluar pula tidak dapat di elakkan. Mahu atau tak, keadaan inilah yang sedang kita hadapi sekarang tambahan lagi ketika dunia berhadapan dengan kenaikkan harga minyak. Para pengeluar juga adalah pengguna pada masa yang sama. Para pengeluar tidak boleh untuk memikirkan keuntungan semata-mata. Mereka perlu bekerjasama dalam hal ini. Mereka juga perlu memikirkan jalan alternative lain untuk mengatasi masalah yang dihadapi kesan oleh penetapan harga syiling oleh pihak kerajaan.
Bagi saya, dengan keluar dari sesuatu industri adalah satu cara yang kurang efficient. Ini seolah-olah berhenti sebelum berjuang. Mugkin ada cara yang tersirat.
Sapa tahu?



-101007-

Tee Ke Li said...

Recently, the petrol RON95 was goes up by 20 sen and the food prices was going up too. In my opinion, the food prices more expensive now due to the fuel hike especially the vegetables. For example carrots were prices at about RM1.30 per kilo and now they are sold at RM1.80. It is the same for tomatos which were previously priced at RM1.50 per kilo and are now RM1.80.

TEE KE LI, 211798