The Price of Soy

This piece by the AP’sMichael Casey¬†poses a bit of a challenge for market believers like me:

Over the past decade, Indonesia went from growing more than half its soy to relying on the U.S. for 70 percent of it. Now the poor among this country’s 220 million people are going hungry because of changes thousands of miles beyond their shores. It is the same story for dozens of countries that came to depend on richer nations for cheap food, only to find themselves squeezed when prices start rising last year.

I believe the economists’ jargon here is a pecuniary externality, which would not in strict terms be viewed as a “market failure.” The necessary demand destruction is happening via the people Casey interviewed who are going hungry.

2 Comments

  1. this is only an issue if soy was NOT being exported in the past (i.e., local prices were below world prices) AND if additional revenue from current crops is less than if soy was being grown now… (e.g., I work at a salary to earn $$ that I can buy food with. If I was growing my own food, I’d be able to produce less than I can afford on a salary)

    Major distributional issues are more likely the problem than markets.

  2. David,
    Thanks.

    Is another cause the slowness with which governments tend to react to societal changes?

    It seems that often, the change in the economy, whether through lessening local supply, take over of farm land for other uses, real estate supply and demand, or inadequate distribution networks (think China and food or the US and electricity from wind power) occurs faster than the local people or local government is able to plan for it and execute the plan.

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