UN food price index rises for sixth month in a row to highest since
records began in 1990
Jill Treanor
Thursday January 6 2011
guardian.co.uk
http://www.guardian.co.uk/business/2011/jan/05/world-food-prices-danger-record-high-un
Soaring prices of sugar, grain and oilseed drove world food prices to
a record in December, surpassing the levels of 2008 when the cost of
food sparked riots around the world [http://www.guardian.co.uk/news/
blog/2008/apr/09/foodriots" title="], and prompting warnings of prices
being in "danger territory".
An index compiled monthly by the United Nations surpassed its previous
monthly high ? June 2008 ? in December to reach the highest level
since records began in 1990. Published by the Rome-based Food and
Agriculture Organisation (FAO), the index tracks the prices of a
basket [http://www.fao.org/worldfoodsituation/wfs-home/en/" title="]
of cereals, oilseeds, dairy, meat and sugar, and has risen for six
consecutive months.
Abdolreza Abbassian, FAO economist, told the Guardian: "We are
entering a danger territory." But he stressed that the situation was
not yet as bad as 2008.
Sugar and meat prices are at record levels, while cereal prices are
back at the levels last seen in 2008, when riots in Haiti killed four
people and riots in Cameroon left 40 dead.
Abbassian warned prices could rise higher still, amid fears of
droughts in Argentina and floods in Australia and cold weather killing
plants in the northern hemisphere.
"There is still room for prices to go up much higher, if for example
the dry conditions in Argentina tend to become a drought, and if we
start having problems with winterkill in the northern hemisphere for
the wheat crops," Abbassian said.
Prices have been rising steadily but Abbassian said that by now he had
been expecting food prices to start to fall because many poorer
countries had good harvests last year.
But this has not happened after unpredictable weather caused a poor
wheat crop in Russia. Last year European wheat prices doubled, US corn
prices rose more than 50% and US soybean prices jumped more than 30%.
The current floods in Australia [http://www.guardian.co.uk/world/2011/
jan/05/rockhampton-floods-to-peak-queensland" title="] have the
potential to affect prices for commodities such as sugar and cane
growers are warning of production problems for up to three years.
Wheat supplies are expected to be affected ? Australia is the fourth-
largest wheat exporter ? and the country is also the largest exporter
of coking coal, production of which is also being affected by the
floods.
At the same time demand from emerging countries such as China and
India has been strong.
Abbassian played down concern that the rising food prices could cause
fresh riots, as happened two years ago when the price of cereals was
largely the cause of the problem, along with a dramatic spike in the
price of oil. He noted that another rise in the oil price - currently
around $95 a barrel - could exacerbate the problem. While oil is
rising in price, and forecasters are suggesting it could hit $100, it
is still well below the $145 peak it reached in July 2008 on a wave of
buying by international speculators.
The FAO food index hit 215 points last month, up from 206 in November,
to break the 213.5 registered in June 2008. It shows a dramatic rise
in prices for food in a decade. In 2000 the index stood at 90 and did
not break through 100 until 2004.
Economists are on guard for spikes in inflation around the world that
might force up interest rates, which in the developed world are at
historically low levels as a result of the banking crisis.
Julian Jessop, chief international economist at Capital Economics,
said: "The upward pressure on inflation this year from the recent
surge in the cost of agricultural commodities will be much greater
than that from the pick-up in oil prices".
Jessop said the price of oil was rising largely as result of demand
caused by a rebound in global industrial activity. "In contrast, the
surge in agricultural food prices is largely a consequence of supply
shocks, such as droughts in major wheat producing countries. These
have been compounded by speculative pressures."
guardian.co.uk Copyright (c) Guardian News and Media Limited. 2011
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