Based on your understanding of the passages given below, answer the questions that follow.
Reading Comprehension:
The current global food situation is very serious and hence, we need to understand the reasons for such a dramatic increase in food prices in a short period. It is argued the increases in energy costs are resulting in cost push inflation but contribution of energy costs to overall costs in agriculture may not explain the huge increase in food prices.
Related to the current elevated energy prices, there has been a diversion to corn and edible biofuels, which is significantly influenced by policy mandates. Very clearly this diversion to biofuel is a policy induced new reality, which coincided with price escalation in precisely those products and hence, is noteworthy.
The financialization of commodity trade and current extraordinary conditions in global financial markets could have influenced the spurt in prices. The recent reductions in interest rates in the US and the injection of liquidity have resulted in investors seeking new avenues such as commodity markets, in view of the turbulence in financial markets and the low returns in treasuries. The relatively easy liquidity and low interest rates by themselves make holding of inventory attractive and does induce greater volatility in commodity markets. The weakening of the US dollar is also advanced as a reason for the recent volatility in commodity markets, including food items. It is evident that this phenomenon is now also coinciding with the across the board rise in food prices.
In brief, while there are demand and supply side pressures on food items, there is considerable merit in the argument that the recent extraordinary increases in food prices are closely linked to public policy responses to high energy costs in advanced economies and the turbulence in financial markets and financial institutions. It is said that the impact of such policy induced diversion of food to biofuels is significant at this juncture and reflects a preference to fill the fuel tank of automobiles rather than fill the empty stomachs of people. Similarly, it is sometimes held that the weight accorded to financial stability in public may now be at the expense of stability in real sector especially of sensitive commodities like food. At the same time, there is a general consensus that public policy in regard to food in many economies around the world has not provided adequate incentives to farmers to increase the supply of food and other agricultural products to comfortably match the growing demand over the medium term.