This is the Cato Daily Podcast for Monday, April 28, 2008.

I'm Caleb Brown.

U.S. policies often act to depress food prices worldwide.

That may not seem so bad in a world of rising food prices.

But by dumping subsidized U.S. farm goods of the world market, it may turn into a curse.

After years of consuming cheap farm products from the US, many poor

countries haven't invested enough to weather the recent spike in prices.

Sally James, a trade policy analyst at the Cato Institute, separates the wheat from the chaff.

On the demand side, we have growth in previously poor countries. We've seen growth of the middle class, so China and India,

eating more meals more often, eating different kinds of meals, eating more meat for example,

and there's something like a 7 to 1 ratio of grains to meat.

In other words, if you want 1 unit of meat, it takes 7 units of grain to produce that meat so obviously demand for grain goes up.

There's been encroachment on land as cities get bigger.

Some of the suppliers has gone down. In the shorter term on the

demand side we've seen policies in the United States and the European Union

but most obviously the United States encouraging the development of biofuels.

So in other words corn is diverted to use in ethanol to put people's gas tanks. So that's been a more recent phenomenon that's

kind of created artificial demand if you like for some of these commodities and of

course as farmers switch to growing more corn that means they grow less of other

things like soybeans and wheat. So those prices have gone up as well. Now on the

supply side we've seen some supply disruptions of

commodities because of weather problems, drought and Australia, floods in

...