Global Trends by Martin Khor
Monday 7 February 2011
Concern over soaring food prices
Food prices have shot up to record highs, even above the levels in 2008, and countries should act to counter the effects before there is more social unrest.
Food prices across the world have soared to their highest ever level, even exceeding the previous peak levels in mid-2008 before the recession caused by the global financial crisis dampened the prices.
The food price inflation is causing concern in many countries, as access to food is important for social stability. The last time prices shot up to such high levels, in 2008, there were riots in many countries.
High food prices also contributed
to the discontent that led to the current protests in
In January, the average price of food items globally rose to its highest ever recorded level, according to the Food and Agriculture Organisation. The FAO's food price index increased for the seventh month running, up by 3.4% from December 2010.
Prices of almost all the commodity groups jumped in January compared to December. The cereal price index was 3% above December and the highest since July 2008, though still 11 percent below its peak in April 2008. The oils and fats index rose by 5.6%, nearing the June 2008 record level.
The dairy price index shot up 6.2%, and the sugar price index by 5.4%. The meat price index however remained stable.
soaring prices of various food items are caused by several factors,
as pointed out by speakers at the Global Commodities Forum at UNCTAD
(the UN Conference on Trade and Development) in
First is the growing demand for food. This is due to population growth but also the revival of economic growth following the 2008-2009 recession.
is the weather and other factors that affected supplies of some crops.
Wheat production was severely affected by the drought in
production is forecast to fall this year in
steep price increases in coffee in the past three years are due mainly
to reduction in crop production in
is the competition for land to produce certain crops that are used both
for food and for bio-fuels. In the
Fourth is the growing investments placed in commodity markets by investors in the current situation of low interest rates and excess liquidity. The extent to which speculation is a cause of rising commodity prices has been a matter of quite intense debate, and the situation may vary from commodity to commodity.
According to a senior official of the International Sugar Organisation, the recent soaring of sugar prices (now at a 30-year high) is due to fundamentals. “But the financialisation of commodity markets magnified the price surges.”
Other commodities besides food items have also been increasing rapidly, including oil and cotton.
According to the commodity-price index (in dollar) of The Economist magazine, the index for all commodities on 1 February was 6.2% higher than a month earlier and 49.7% above a year ago.
The index for food items was 6.4% above a month ago and 44.8% above a year ago. And the price of oil at USD90.68 was 17% above a year ago.
has become a significant problem in many developing countries, being
around 5% in
In several Asian countries, the prices of some important food items have been soaring, according to the FAO.
the main producer area of
The surge in onion price followed unseasonal rains during the October-November harvesting season in the key growing states, which resulted in severe damage to the summer crop and supply shortages. Potato and tomato crops have also been affected and their prices have shown marked increases.
In December 2010, food prices were on average 2.8% above the December 2009 level. The increases on some items were: sugar, jam, chocolate (20.6%), fruits (4.6%), vegetables (3.6%), milk and eggs (3.4%), meat (3.1%), fish and seafood (1.8%) and rice and bread (1.1%).
There were hefty price jumps in December 2010 compared to a month ago for onions (17%), sugar (10%), spinach (7.4%) and eggs (3.6%) and choy sum (2.4%) But prices also fell for tomato, cucumber and chillies.
In the weeks ahead, governments would be wise to pay close attention to inflation and especially food prices, and work towards solutions which in the medium term should include a boost to local food production.