By Paul Waldie, Globe and Mail, January 5, 2011
Food prices have soared to record levels around the world, raising fears that poor countries could face a crisis similar to the one that led to rioting and rationing two years ago.
“We are entering a danger territory,” Abdolreza Abbassian, an economist at the United Nations’ Food and Agricultural Organization (FAO) told reporters Wednesday.
The FAO’s food price index, a formula based on the wholesale price of 55 products including rice, meat, wheat, milk and cheese, reached a record high in December. The index has risen in each of the past six months and it hit 214.7 in December. The previous record was 213.5 set at the height of the food crisis in June of 2008, when soaring prices led to riots in several countries such as Haiti, Somalia and Cameroon while others, including India and Vietnam, restricted rice exports.
“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,” Mr. Abbassian said. “I am feeling less optimistic than I was in November – we have not had much good news.”
Prices for many agricultural commodities started rising last fall largely because of poor grain crops in Canada, Russia and Ukraine. They have spiked even higher recently because of dry weather in Argentina, a major soybean producer, and flooding in parts of Australia, which has wiped out many wheat crops. The price of wheat has jumped about 17 per cent in the last month while corn is up 11 per cent. Both are now close to two-year highs. Other food staples have been soaring as well, including canola, up 43 per cent last year, and sugar, which hit 30-year highs.
“The price spike has raised fresh concerns about food price inflation,” said Kenrick Jordan a senior economist at the Bank of Montreal. Mr. Jordan said while the impact will be manageable for developed countries: “In developing countries, where food accounts for a much more significant part of household budgets, the inflation threat is much greater.”
If anyone thought that countries were isolated from global conditions, here is one story that could be a wake-up call for those people. Furthermore, this story is one more in which ordinary people going to their supermarket, or neighbourhood food outlet feel completely powerless to do anything to change.
Food price inflation, while partially based on climate conditions, could make millions starve. That may sound a little too stark for some, but it is nevertheless a potential reality.
By Michael Brush, Globe and Mail, December 8, 2010
A phenomenal spike in agricultural commodities this year -- from cotton and corn to sugar and wheat -- is making its way to store shelves. General Mills Inc. (GIS-N36.620.932.61%), Unilever NV (UN-N31.06-0.48-1.52%), Nestlé, McDonald's Corp. (MCD-N74.660.350.47%), and Domino's Pizza (DPZ-N16.680.513.15%) all recently cautioned that price hikes are around the corner.
"Agricultural prices are going to go higher, and much higher over the next decade or two," predicts famed investor Jim Rogers, chairman of Singapore-based Rogers Holdings.
Several trends are driving food prices higher: a rising middle class in emerging economies that wants to eat better; weird weather patterns around the globe; the growing use of ethanol to fuel vehicles; and a shrinking dollar that buys less grain than it used to.