by Patrick Appel
Krugman cries out that "grain production is down and it’s down substantially more when you take account of a growing world population":
You might ask why a production shortfall of 5 percent leads to a doubling of prices. Part of the answer is that some kinds of demand are growing faster than population in particular, China is becoming a growing importer of feed to meet the demand for meat. But the main point is that the demand for grain is highly price-inelastic: it takes big price rises to induce people to consume less, yet collectively that’s what they must do given the shortfall in production.
Why is production down? Most of the decline in world wheat production, and about half of the total decline in grain production, has taken place in the former Soviet Union mainly Russia, Ukraine, and Kazakhstan. And we know what that’s about: an incredible, unprecedented heat wave.
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