The global food price index produced by the UN Food and Agriculture Organization climbed to a record high in February 2011, higher than the previous peak in 2008 when high food prices sparked riots in several countries. In many of the world’s developing countries, people spend 60-80 percent of their income on food. They will be severely affected.
Causes and Effects of the Current High Food Prices
Earlier this year the World Bank warned that food prices worldwide are rising to "dangerous levels" and have pushed 44 million people in developing countries into poverty since June last year. Surging food prices have fueled protests that toppled Tunesia's president in January, Egypt's president Hosni Mubarak in February and spread to other African countries.
Egypt's rapidly rising population, especially those living in urban areas like Cairo, experience higher food prices as a threat to their health. Wheat prices have doubled since last summer. The price of corn has risen about 75 percent since last June. Prices for sugar and cooking oils have also spiked.
Weather Conditions and High Oil Price Impact Food Prices
Across the world, food stocks are down partly because of extreme weather, ranging from drought to floods, in Russia, Pakistan, Europe, North America and Australia. A devastating freeze in early February in Mexico damaged fresh vegetable fields and a drought in Russia destroyed one-third of the country's grain crop. The demand for food, meanwhile, has been growing, especially in big developing countries like China. Rising crude oil prices also push food prices up. If imported, food is transported great distances. Higher fuel costs increase shipping costs, which translates into higher food prices.
Ethanol Production Increases Food Prices
Government policies also influence food prices. The U.S. government gives tax credits for the production of ethanol. Corn is turned into bio fuels. These subsidies have pushed up the price of corn by 40 percent according to calculations by agricultural economist Bruce Babcock. The more ethanol is produced, the less corn is available for livestock and people. As more people around the world grow more affluent, they eat more meat.
With grains fed to the animals that provide the meat, the amount of corn and wheat for the food supply is further reduced. According to a World Bank report, wheat prices increased 54 percent in Kyrgyzstan, 45 percent in Bangladesh, 37 percent in Tajikistan, 33 percent in Mongolia, 31 percent in Sri Lanka, 19 percent in Afghanistan and 16 percent in both Sudan and Pakistan.
G20 Agriculture Ministers Plan Meeting to Address Food Security
Bruno Le Maire, French Minister for Agriculture, blamed financial speculation in commodity markets for contributing to soaring food prices. Citing the fluctuation of wheat prices on the French wholesale market, from €100 to €260 a ton this year, he said that increasing production was just barely keeping up with rising demand. He proposed an unprecedented exchange of information on grain stocks, pointing out that among the G-20 countries there was currently no cooperative mechanism on agriculture.
An agriculture database similar to the Joint Oil Data Initiative, which gathers oil data, could improve the transparency of global commodity supplies. Analysts say that countries may not be inclined to disclose information about their strategic reserves or have the infrastructure in place to collect reliable data from their farmers.
Farm ministers from the Group of 20 developed and emerging economies plan to meet in Paris in June to address surging food prices."It is unacceptable that there should be speculation on hunger in the world," Bruno Le Maire said.
Sources
- Baragona, Steve, Skyrocketing Food Prices Push Millions into Extreme Poverty, Voice of America News.com, 2/16/2011.
- Gjelten, Tom, The Impact of Rising Food Prices on Arab Unrest, NPR, Morning Edition, 2/18/2011
- Goldstein, Jacob, Why Are Food Prizes Going Crazy?, NPR Blog, 2/16/2011
- France and FAO call for greater regulation to curb commodities speculation. Merco Press. South Atlantic News Agency. February 4th, 2011.
- Press Conference on Agricultural Priorities for G 20 Presidency of France, United Nations Department of Public Information (DPI), Relief Web, 2/17/2011.
- The World Bank, Food Price Watch, February 2011.
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