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Hello STRATEGY SESSION: Life During a Market Movement When the market moves, planets can tremble. curve. The Financial Times reported that the Philip- In early
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STRATEGY SESSION: Life During a Market Movement When the market moves, planets can tremble. curve. The Financial Times reported that the Philip- In early spring 2008, shifting demand and supply pine government paid $700 per ton of rice-almost curves were impacting every country. The global double the price the government paid in December food supply was in disequilibrium, and it appeared 2007. The price of corn increased by 73% between that the world was in a panic. During one week in April 2007 and April 2008 (from $3.46 a bushel to early spring 2008, major governments worldwide $6 a bushell. Wheat increased by 123% in this same used their sovereign powers to restrict trade in basic period (from $5.63 to $12.57 a bushell. In China, foods. Saudi Arabia cut import taxes on basic food- the price of pork increased by 63%. In early 2012, a stuffs, India removed tariffs on edible oils while ban- bushel of corn cost $6.42 while a bushel of wheat was ning rice exports, and Vietnam cut its rice exports priced at $6.48. by 22%. Political unrest was beginning to erupt in This rightward shift in the demand curve for food countries as diverse as Egypt and Mexico over the was attributed to several factors. One theory was that rising cost of food. What is perhaps a mere incon- Thomas Malthus's mathematical doomsday machine venience of paying $4.25 for a gallon of milk in the was finally reaching fruition. The world population United States is one of life or death to those who continues to expand, while agricultural acreage con- live on the fringes. For the 300 million Chinese who tinues to shrink. Many governments in developing live in poverty, food accounts for 50% of household countries have focused efforts on economic devel expenses. opment rather than agriculture. A UN report shows Look at what caused this commotion. The figure the annual growth in agricultural productivity slowed on the next page shows the behavior of food prices to 1% by 2002. A growing middle class in large devel- prior to mid-2008. oping countries like China and India consumes more You can clearly see the acceleration of prices food. As people increase their income, they generally across major food groups. This is a shift in the demand eat more food. In China, consumption of meat hasStep by Step Solution
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