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 grains, could prevent a problem.
The UN data measures commodity prices on the world export market. Those are generally far removed from supermarket prices in wealthy countries like the US. In this country, food price rise 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 Organisation rose 32 per cent from June to December, according to the report published on Wednesday.
“We are at a very high level,” said Abdolreza Abbassian, an economist for the organisation, which is based in Rome. “These levels in the previous episode led to problems and riots across the world.”
Abbassian said 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. 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.
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, Abbassian said. Heavy rains in Australia delayed the wheat harvest there, resulting in a poorer crop. In the US dry weather is expected to hurt the winter wheat crop.