Determinants of Food Supply and Demand

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Table of Contents

Abstract
Introduction
Factors that affect food demand
Factors that affect food supply
Conclusion
References

Abstract

Numerous changes have been observed in food supply and demand trends over the past five years. Several factors are responsible for these changes. They include food prices, food scarcity, climate, dietary preferences, population growth, economic statuses of consumers, and consumer attitudes and behavior.

Other factors include cost of production and effectiveness of distribution channels. Demand and supply determines prices and products and vice versa. For example, high demand raises prices while low demand lowers prices. High prices increase supply while low prices decrease demand. Consumers have been the main determinants of demand and supply trends because of their consumption patterns. Changes in human population have influenced demand and supply of food, and will continue to influence food trends in future.

Introduction

In the past few years, the demand and supply of food has increased and decreased in varying degrees. Several reasons are responsible for the observed changes in demand and supply of food. These factors include food scarcity, food prices and volatility, population growth, cost of production, climate, technological factors, economic capabilities of consumers, and tastes and preferences of consumers (Rosegrand et al, 2001).

Supply and demand are the main determinants of food prices. Supply refers to the quantity of food that producers avail to consumers at any time. On the other hand, demand refers to the quantity of food that consumers are ready to buy for consumption from producers at certain market prices.

Factors that affect food demand

The price of food, number of consumers, scarcity of food, increasing population, and consumers’ tastes and preferences are the main factors that affect food demand (Rosegrand et al, 2001). Increase in food prices is an issue that has been a topic of discussion for many years. The world has experienced a perpetual rise in food prices for the past five years.

Reasons for the rise in prices include increased cost of production, decline of major world economies, rising prices of energy, and stringent policies that govern import and export of food products. The number of consumers determines the demand for products in the market. For example, demand is high when the number of consumers is high and vice versa.

According to Kearney, “with the world’s population rising and expected to reach 9 billion by 2050, a plan for the development of the organic sector is needed to meet this demand” (Kearney, 2012). Technology increases the efficiency of executing farming operations, which increases production. For example, use of tilling and harvesting machines reduces cost of production and promotes timely delivery of products to consumers.

Another critical aspect that has affected demand is food scarcity. Several reasons are responsible for food scarcity. These include population growth and lack of resources (Rosegrand et al, 2001). In addition, lack of proper distribution channels causes food scarcity. Mendez and Hopkin (2001) noted, “as the number of people increase, availability of land, water and other resources dwindles. This leads to decrease in production, hence increase in demand.”

Consumers have different tastes and preferences that determine the type of products that are supplied by producers. For example, many people have embraced vegetarianism and thus increased demand for vegetables and fruits. Due to high demand for vegetables and fruits, producers increase production and supply in order to fulfill the needs of consumers. If supplies exceed demand, then prices decrease. However, if demand exceeds supply, then prices rise.

Another factor that has influenced demand in recent years is changes in diets and consumer attitudes and behavior. This can be ascribed to varying dietary preferences among consumers. For example, there has been an increase in consumption of cereals, vegetables, and livestock products. On the other hand, a decline in consumption of tubers and pulses has been observed.

High consumption of vegetables and livestock products increases demand, as more consumers need these products (Rosegrand et al, 2001). On the other hand, low consumption of tubers and roots results in low demand because few consumers need them. High consumption increases demand while low consumption decreases demand. Certain foods supply more nutrients than others do. Therefore, the types of nutrients that consumers require determine demand (Kearney, 2010).

If consumers want foods that supply proteins, the demand for beans will rise. Health awareness also influences demand. Consumers who are trying to lose or manage weight will avoid foods that are rich in high fiber content and consume foods that contain high dietary fiber. Therefore, demand for cereals, seeds, and nuts will rise while demand for eggs and dairy products will decrease.

Factors that affect food supply

Supply refers to the quantity of food that producers supply to consumers based on demand. The reasons for changes in food supply include increasing costs of production, financial constraints, poor distribution channels, volatility of food prices, and adverse weather conditions (Mendez & Popkin, 2004). Demand dwindles when prices of farm inputs such as chemicals, seeds, and fertilizers increase. High prices affect supply because farmers produce little due to reduced access to inputs and increased costs of production.

On the other hand, other farmers abdicate farming and explore other ventures that give high returns, thus lowering production and supply. Supply is also determined by the financial statuses of consumers. If consumers do not have money to buy food, then producers withhold their produce. They supply as much as consumers can afford to buy.

Producers require proper distribution channels in order to supply their produce to consumers. However, due to poor infrastructure, distribution has been affected (Mendez & Popkin, 2004). Producers are unable to cater for high demand for certain products. For example, due to poor storage facilities, supply for perishable products has declined because products go stale before reaching consumers. This problem is aggravated by changing prices. According to Kearny,

When food prices are high, supply increases because producers try to take advantage of the high prices to make profits. However, when prices are low, producers supply little and withhold large quantities to avoid making losses (Kearny, 2010).

Finally, weather conditions affect food supply significantly. Harsh weather conditions such as low rainfall and high temperatures reduce production considerably. Agriculture and fisheries are sectors that rely heavily on certain climatic conditions. For example, high temperatures disrupt marine ecosystems, thus reducing availability of fish as source of food (Kearney, 2010).

Temperature affects crop production and growth. For example, low temperatures result in poor quality grains that end up being used for other purposes such as animal feed. On the other hand, high temperatures lead to death of crops before maturity, thus reducing production. Low production affects supply because produces cannot supply enough food to cater for the needs of consumers.

Conclusion

Several factors are responsible for the changing trends in food supply and demand. They include food prices, climate, consumer preferences and attitudes, production cost, volatility of prices, availability of distribution channels, and dietary preferences. The main factor is price.

There is an inverse relationship between food price, and demand and supply. An increase in one results in a decrease in the other. For example, high prices increase supply and decrease demand. According to research, food demand and supply trends will continue to change due to population growth and changes in technology.

References

Kearney, J. (2010). Food Consumption Trends and Drivers. Philosophical Transactions of the Royal Society, 365(1554), 2793-2807.

Mendez M., & Popkin B. M. (2004). Globalization, Urbanization and Nutritional Change in the Developing World. Journal of Agricultural Development, 2 (5), 220–241.

Rosegrand, M., Paisner, M., & Witcover, J. (2001). 2020 Global Food Outlook: Trends, Alternatives, and choices. Web.

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