Food prices are going up

Global food prices are at a record high, according to the U.N. Food and Agriculture Organization’s (FAO) recently released Food Price Index for January. The index measures the average monthly price change for basic food items, including cereals, dairy, meat, oil, and sugar.
The January index shows a 3.4 percent increase above already-high December 2010 levels, and prices are up for the seventh month in a row. The index also tops peak levels reached in 2008, which sparked violent protests and riots from Haiti to Bangladesh to Cameroon. And this also marks the highest recorded level since the FAO started its price index in 1990.
In addition, the January index shows a particularly high rise for dairy products – up 6.2 percent since December 2010. It also reflects a steady rise in global wheat and grain prices.
FAO economist Abdolreza Abbassian says, “High food prices are of major concern especially for low-income food deficit countries that may face problems financing food imports, and for poor households which spend a large share of their income on food.” He warned that the new figures clearly show that the upward pressure on world food prices is not abating and that high prices are likely to persist in the months to come.
A combination of factors is responsible for pushing prices to this all-time high. Extreme weather is part of the story. Wildfires in Russia, during the summer of 2010, drove the government to impose an export ban on its wheat stocks. And the recent floods in Australia and dry weather in Argentina are pushing prices even higher. The price of oil is also steadily rising – it recently rose above $100 a barrel. But financial speculation on global markets by large international grain trading companies is also to blame.
High prices were a major factor in the violent protests that forced Tunisia’s president to flee the country in January.  And the ongoing protests in Egypt that are capturing headlines across the world are also tied to price hikes. An article in the Vancouver Sun reports, “Soaring food prices aren’t the only reason that Egyptians took to the streets to try to topple their long-serving president. But they’re a significant factor, and a steady surge in global commodity prices reminiscent of 2008 is sure to bring new battles over food security this year.” Egypt is the world’s leading wheat importer and the price of wheat has risen by 70 percent over the past year.
At the World Economic Forum meeting in Davos, Switzerland last week, leading U.S. economist Nouriel Roubini raised concerns about these events and warned that food prices pose a serious threat to global stability.
Recognizing the urgency of the issue, the FAO recently released a policy guide for countries hit hard by high food prices. According to Richard China, Director of the Policy and Programme Development Support Division at the FAO, only investments in developing countries’ agricultural sectors will result in sustainable increases in productivity, healthy markets, increased resilience to international price spikes, and improved food security in the longer term.
By Janeen Madan