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Global food prices hit record high
Problem is set to worsen after a massive snowstorm in the United States and floods in Australia.
Last Modified: 04 Feb 2011 05:31 GMT
Big companies have increased their product prices because of higher raw material costs [GALLO/GETTY]

World food prices have hit their highest level on record in January, the United Nations has said.

It said on Thursday that its Food and Agriculture Organisation Food Price Index rose for the seventh month in a row to reach 231, topping the peak of 224.1 last seen in June 2008.

It is the highest level the index has reached since records began in 1990.

"The new figures clearly show that the upward pressure on world food prices is not abating. These high prices are likely to persist in the months to come," said Abdolreza Abbassian, an economist for FAO, which is based in Rome.

Rising food prices have been cited among the driving forces behind the recent popular revolts in north Africa, including the uprising in Egypt and the toppling of Tunisia's long-time president Zine El Abidine Ben Ali.

In response, some countries are increasing food imports and have built stockpiles to meet their domestic needs.

Among them is Algeria, wary after food riots in early January. It has made huge wheat purchases to avoid shortages, and on Thursday it announced plans to lift a 19-year-old state of emergency in
a bid to to avert spreading protests.

Capital Economics, a consultancy in London warned that "Even if the crisis in Egypt eases soon, the actions taken by governments elsewhere to prevent similar uprisings in their own countries will add to the upward pressure on global agricultural commodity prices."

In Central America, Honduras has frozen prices on many basic foodstuffs despite complaints from farmers.

El Salvador is increasing anti-poverty programs by 30 per cent, and Guatemala is considering slashing import tariffs on wheat and is handing out food and cash vouchers to landless peasants.

Indonesia, Southeast Asia's biggest economy, last week bought 820,000 tonnes of rice, lifting rice prices, while suspending import duties on rice, soybeans and wheat.

Robert Zoellick, World Bank President urged world leaders to "wake up" to the dangers of rising food inflation.

"We are going to be facing a broader trend of increasing commodity prices, including food commodity prices," he said.

During the last food price crisis, the World Bank estimated that some 870 million people in developing countries were hungry or malnourished. The FAO estimates that number has increased to 925 million.

The FAO data showed that prices for dairy products rose by 6.2 per cent from December, oils and fats gained 5.6 per cent, while cereals went up by 3.0 per cent because of lower global supply of wheat and maize.

Alarming situation

The problem is set to worsen after a massive snowstorm in the United States and floods in Australia. And economists warned that chaos in Egypt could push prices up further and foment more unrest in the region.

Sugar prices also have surged to three-decade highs on fears of the damage that Cyclone Yasi would bring to the Australian cane crop.

Prices for Malaysian palm oil, a cooking staple in the developing world, hit 3-year highs on flooding.

Big companies have had to adjust to higher raw material costs.

Kellogg Co, the world's largest breakfast cereal company, said on Thursday that it has boosted prices on many of its products to offset rising costs for ingredients such as grains and sugar.

"Today's announcement by the Food and Agriculture Organization should ring alarm bells in capitals around the world," said Gawain Kripke, a policy and research director for Oxfam America, an international development group.

"Governments must avoid repeating the mistakes of the past when countries reacted to spiraling prices by banning exports and hoarding food. This will only make the situation worse and it is the world's poorest people who will pay the price," he said.

Janis Huebner, economist at Germany's DekaBank said inflation partly fuelled by increasing food prices could in turn trigger interest rate rises in several countries this year.

"This could mean a slowing down of growth in the countries which raise their interest rates," he said.

The report showed that Somalia and Uganda have been particularly hard hit in Africa and that the ongoing unrest in Ivory Coast has helped push up prices in West Africa as a whole because of its status as a key transport hub.

But the most dramatic rises were seen in Asia, with a surge in prices across the board in India due to "unseasonal rains" during the harvest season "which resulted in severe damage to the summer crop and supply shortages," FAO said.

Josette Sheeran, the UN World Food Programme's executive director said that the world is now in an era where it has to be very serious about food supply.

"If people don't have enough to eat they only have three options: they can revolt, they can migrate or they can die. We need a better action plan," she said.

Source:
Agencies
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