Thursday, January 6, 2011
World 'in danger' over food prices, says UN
World food prices continued to rise sharply in December, bringing them close to the crisis levels that provoked shortages and riots in poor countries three years ago, according to newly released United Nations data.
Prices are expected to remain high this year, prompting concern that the world may be approaching another crisis, although economists cautioned that many factors, like adequate stockpiles of key grains, could prevent a serious problem.
The United Nations data measures commodity prices on the world export market. Those are generally far removed from supermarket prices in wealthy countries like the United States. In this country, food price inflation has been relatively tame, and prices are forecast to rise only 2 to 3 per cent this year.
But the situation is often different in poor countries that rely more heavily on imports. The food price index of the United Nations Food and Agriculture Organization rose 32 per cent from June to December, according to the report published Wednesday. In December, the index was slightly higher than it was in June 2008, its previous peak. The index is not adjusted for inflation, however, making an exact comparison over time difficult.
The global index was pushed up last year by rising prices for cooking oils, grains, sugar and meat, all of which could continue to remain high or rise.
“We are at a very high level,” said Abdolreza Abbassian, an economist for the organization, which is based in Rome. “These levels in the previous episode led to problems and riots across the world.”
Mr. Abbassian said that bad weather affecting commodity crops in many exporting countries might help keep prices high over the next several months.
“The concern is that the long duration of the high prices for the months to come may eventually result in these high prices reaching the domestic markets of these poorer countries,” he said. “In the event of that, there is the chance of the repeat of the events of 2007 and 2008.”
At that time, high petroleum prices, growing world demand for food and poor harvests in some areas combined to sharply push up food prices in poorer importing countries. That led to shortages and sometimes deadly riots in several countries, including Egypt, Haiti, Somalia and Cameroon.
Mr. Abbassian said there were several crucial differences this year.
Countries in central, western and southern Africa have had generally good harvests from crops planted last year, easing reliance on imports. And grain prices remain significantly below the highs they hit in 2007 and 2008. Export prices for rice are 40 to 50 per cent below those highs, he said.
Grain prices have a much greater impact on the food budgets of people in poor countries than prices for commodities like sugar or meat, which tend to make up a much smaller portion of their diet.
In addition, global supplies of rice and wheat are much more robust today than during the crisis.
But ensuring sufficient grain supplies depends on good harvests this year in major exporting countries. Dry conditions in Argentina that could hurt corn, and soybean crops are worrisome, Mr. Abbassian said. Heavy rains in Australia delayed the wheat harvest there, resulting in a poorer crop. In the United States, harsh, dry weather is expected to hurt the winter wheat crop.
Gawain M. Kripke, policy director of Oxfam America, said the food price increases were a polite warning. “We may get much more rude warnings soon,” he said.
The United Nations estimates that nearly one billion people worldwide do not get enough food, Mr. Kripke noted. “That’s almost certain to increase as prices rise, especially if they rise in an aggressive manner, which they are,” he said. In the United States, meanwhile, the Agriculture Department has predicted that retail food prices will rise 2 to 3 per cent in 2011. That is a higher rate than in the last two years but less than the 5.5 per cent food inflation that hit American consumers in 2008. In November, the last month for which data is available, food prices in the United States rose 1.5 per cent compared with the same month the previous year.
Joseph Glauber, the Agriculture Department’s chief economist, said that rising world commodity prices could be expected to have their greatest impact in this country on meat and dairy prices because they can push up the price of livestock feed.
As feed prices go up, farmers often cut the size of herds, meaning less meat ultimately reaches the market. Beef, pork and dairy prices rose faster last year than overall food prices and are expected to continue that trend this year.