Explaining the Rise in Agricultural Prices: Impact of Neoliberal Policies on the Agrarian Economy

Abstract

The international prices of agricultural commodities have exhibited a rising trend since the mid-2000s. This article explains the phenomenon using demand–supply framework from a macroeconomic perspective. It does not find any evidence in favour of the mainstream argument of increased demand from India and China being responsible for this price rise. It argues that the pursuit of neoliberal policies have squeezed the earnings of the peasantry and made agriculture an unviable occupation, adversely affecting its supply. During 1995–2004, the annual per capita production of cereals in the world declined at an alarming rate of 0.32 per cent and then over 2005–2012 grew at a meagre rate of 0.85 per cent, respectively. The production of biofuels, using food crops as feed, has further distorted the international food market. Moreover, speculative activities in the futures market fuelled the existing tendencies of rising prices. If sufficient policy support is given to the agrarian economy of developing countries, then this phenomenon can be reversed.