Food Costs At Record High As U.N. Warns Of Volatile Era

Svetlana Kovalyova and John Mair PlanetArk 4 Feb 11;

Record high global food prices showed no sign of relenting following a rash of catastrophic weather, highlighted by a major U.S. snowstorm and a cyclone in Australia, which could put yet more pressure on prices and spark further unrest around the world.

The closely watched U.N. Food and Agriculture Organization Food Price Index on Thursday touched its highest level since records began in 1990.

The index rose for the seventh month in a row to 231 in January, topping the peak of 224.1 in June 2008, when the world was last gripped in a food crisis.

"These high prices are likely to persist in the months to come," FAO economist and grains expert Abdolreza Abbassian said in a statement.

Surging food prices have helped fuel the discontent that toppled Tunisia's president in January and that has spilled over to Egypt and Jordan, raising expectations other countries in the region would secure grain stocks to reassure their populations.

World Bank President Robert Zoellick urged global leaders to "put food first" and wake up to the need to curb price volatility.

"We are going to be facing a broader trend of increasing commodity prices, including food commodity prices," he told Reuters in an interview.

SUPPLY THE KEY

Catastrophic storms and droughts have been battering the world's leading agriculture countries in recent months, including flooding and a massive cyclone in Australia and a powerful winter storm that swept across parts of the United States.

Dubbed "Stormageddon," one of the biggest snowstorm in decades dumped up to 20 inches of snow in some parts of the U.S. grain belt this week, paralyzing grain and livestock movement. Meanwhile, more cold weather in the U.S. Plains ignited concerns the region's winter wheat lacked adequate insulating moisture.

U.S. wheat prices surged to 2-1/2 year highs on Thursday before retreating slightly on profit taking, along with prices of the other big crops such as corn and soybeans. But traders said pressure remains on wheat prices with forecast for more cold in the U.S. Midwest.

Sugar prices also surged to three-decade highs on fears of damage 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 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 fueled 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. "This could involve Asian countries and other regions, this would somewhat brake growth but I do not expect a hard landing."

STOCK BUILDING

Some countries, particularly where food prices loom large in household budgets, have been building up food stocks to contain prices -- and to limit the political and social fallout.

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.

"2008 should have been a wake-up call, but I'm not yet sure all the countries in the world that we need to support this have woken up to it," the World Bank's Zoellick said.

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

Algeria last week bought almost 1 million metric tons of wheat, bringing its purchases to at least 1.75 million since the start of January, and ordered a speeding up of grain imports.

On a day of bloody confrontation in Egypt, where protesters are demanding an end to the 30-year rule of Hosni Mubarak, the U.N. World Food Programme's executive director Josette Sheeran said the world was now in an era where it had 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.

(Additional reporting by Jonathan Saul in London, Martinne Geller in New York, Lesley Wroughton and Christopher Doering in Washington and Michael Hogan in Hamburg; editing by Jonathan Thatcher, Keiron Henderson, Russell Blinch and Xavier Briand)

World food prices reach record high
Dario Thuburn Yahoo News 3 Feb 11;

ROME (AFP) – World food prices reached their highest level ever in January, the UN food agency said on Thursday, as economists warned chaos in Egypt could push prices up further and foment more unrest in the region.

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.

And in its latest survey, the Food and Agriculture Organisation (FAO) said its index, which monitors monthly price changes for a variety of staples, averaged 231 points in January -- the highest 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.

The Index rose by 3.4 percent from December -- with big increases in particular for dairy, cereal and oil prices. The rises were most significant in China, India, Indonesia and Russia, data from FAO's monthly report showed.

Capital Economics, a consultancy in London, blamed extreme weather conditions last year and added: "The resulting increases in food prices have contributed to social unrest in many countries, including in Egypt."

The consultancy warned of a vicious circle in which the crisis in Egypt could raise prices even further since other Arab governments were beginning to restrict exports and stockpile food supplies to prevent similar unrest.

"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," it added.

The FAO's Abbassian however said some countries had become better at managing price shocks after a series of food riots in 2007 and 2008.

"They have learnt from previous episodes," he said, adding: "There are a lot of factors that could spark turmoil in countries and food is one of them."

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

"The increase in prices follows stronger export demand during the last month and concerns about tightening supplies of high quality wheat. The market was also supported by higher oil prices and a weaker US dollar," FAO said.

Meat prices remained broadly stable due to a fall in prices in Europe caused by last month's scare over dioxin poisoning in eggs and pork in Germany, compensated by a slight increase in export prices from Brazil and the United States.

Chris Leather, a policy adviser for international aid agency Oxfam said the news "should ring alarm bells in capitals around the world."

"High global food prices risk hunger for millions of people," he said, calling for concerted international action to prevent price volatility.

He also urged countries to "avoid repeating the mistakes of the past when countries reacted to spiralling prices by banning exports and hoarding food."

Oxfam blamed the price rises on reduced production due to bad weather, increased oil prices making fertilizer and transport more expensive, increased demand for biofuels, export restrictions and financial speculation.

The FAO data showed the Food Price Index averaged 200 points over the whole of 2008, at the height of the 2007/2008 food crisis. The index breached that level for the first time in October 2010 with 205 points and kept rising.

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.


World food prices reach new historic peak
3.4 percent surge in January - FAO updates Food Price Index
FAO 3 Feb 11;

3 February 2011, Rome - World food prices surged to a new historic peak in January, for the seventh consecutive month, according to the updated FAO Food Price Index, a commodity basket that regularly tracks monthly changes in global food prices.

The Index averaged 231 points in January and was up 3.4 percent from December 2010. This is the highest level (both in real and nominal terms) since FAO started measuring food prices in 1990. Prices of all monitored commodity groups registered strong gains in January, except for meat, which remained unchanged.

High prices

"The new figures clearly show that the upward pressure on world food prices is not abating," said FAO economist and grains expert Abdolreza Abbassian. "These high prices are likely to persist in the months to come. High food prices are of major concern especially for low-income food deficit countries that may face problems in financing food imports and for poor households which spend a large share of their income on food."

"The only encouraging factor so far stems from a number of countries, where - due to good harvests - domestic prices of some of the food staples remain low compared to world prices," Abbassian added.

FAO emphasized that the Food Price Index has been revised, largely reflecting adjustments to its meat price index. The revision, which is retroactive, has produced new figures for all the indices but the overall trends measured since 1990 remain unchanged.

The FAO Cereal Price Index averaged 245 points in January, up 3 percent from December and the highest since July 2008, but still 11 percent below its peak in April 2008. The increase in January mostly reflected continuing increases in international prices of wheat and maize, amid tightening supplies, while rice prices fell slightly, as the timing coincides with the harvesting of main crops in major exporting countries.

The Oils/Fats Price Index rose by 5.6 percent to 278 points, nearing the June 2008 record level, reflecting an increasingly tight supply and demand balance across the oilseeds complex.

The Dairy Price Index averaged 221 points in January, up 6.2 percent from December, but still 17 percent below its peak in November 2007. A firm global demand for dairy products, against the backdrop of a normal seasonal decline of production in the southern hemisphere, continued to underpin dairy prices.

The Sugar Price Index averaged 420 points in January, up 5.4 percent from December. International sugar prices remain high, driven by tight global supplies.

By contrast, the FAO Meat Price Index was steady at around 166 points, as declining meat prices in Europe, caused by a fall in consumer confidence following a feed contamination scandal, was compensated for by a slight increase in export prices from Brazil and the United States.