A United Nations food price index reached another record in February, as unrest in Libya pushed up the price of oil, a major part of agricultural production
Phillip Inman guardian.co.uk 3 Mar 11;
Poor harvests, rising oil prices and increasing demand for basic foodstuffs pushed global food prices to a record high in February, according to the United Nations.
Prices rose above their last peak in 2008 for a second consecutive month and could surge further as unrest in Libya and other north African countries pushes up the price of oil, a key part of agricultural production.
UN spokesman David Hallam warned that further jumps in the oil price could have an impact on food markets, which have seen sustained price rises last year.
Hallam said: "Unexpected oil price spikes could further exacerbate an already precarious situation."
Coffee has more than doubled over the last year from $1.30 a pound to more than $2.60. Milling wheat futures, which are a guide to bread prices, have jumped from around €120 a tonne to more than €250 a tonne. Cocoa has risen from $2,800 a tonne to more than $3,600 in the last two months alone.
The UN Food and Agriculture Organisation's (FAO's) food price index, which measures monthly price changes for a food basket composed of cereals, oilseeds, dairy, meat and sugar, averaged 236 points in February, the record in real and nominal terms, up 2.2% from January's record and rising for the eighth month in a row.
Oil prices recently hit two-and-a-half year highs, nearing records set in 2008, with markets fearing north African and Middle East unrest would choke key supplies. Farmers depend on fuel to run agricultural machinery, while dry bulk shippers are heavy oil users, the cost of which are passed on to food buyers.
Spiralling shipping costs for commodities threaten to drive food inflation even higher as nations from Asia to the Middle East and Africa scramble for supplies, analysts say.
The UN is concerned that record prices will trigger a repeat of riots seen in 2008, during the last period of record food inflation.
The Rome-based FAO said that global supply of main agricultural commodities would remain tight until new harvests in key producing countries, and warned food prices could climb even higher. The agency expected a tightening of the global cereal supply-and-demand balance in 2010/11.
"In the face of growing demand and a decline in world cereal production in 2010, global cereal stocks this year are expected to fall sharply because of a decline in inventories of wheat and coarse grains," the agency said.
The FAO said it forecast global wheat production to increase by around 3% in 2011.
Tight cereal markets as food prices increase again
Recent oil price surge adds to concerns over high food prices
FAO 3 Mar 11;
3 March 2011, Rome - Global food prices increased for the eighth consecutive month in February, with prices of all commodity groups monitored rising again, except for sugar, FAO said today.
FAO expects a tightening of the global cereal supply and demand balance in 2010/11. In the face of a growing demand and a decline in world cereal production in 2010, global cereal stocks this year are expected to fall sharply because of a decline in inventories of wheat and coarse grains. International cereal prices have increased sharply with export prices of major grains up at least 70 percent from February last year.
"Unexpected oil price spikes could further exacerbate an already precarious situation in food markets," said David Hallam, Director of FAO's Trade and Market Division.
"This adds even more uncertainty concerning the price outlook just as plantings for crops in some of the major growing regions are about to start," he added.
Food Price Index
The FAO Food Price Index averaged 236 points in February, up 2.2 percent from January, the highest record in real and nominal terms, since FAO started monitoring prices in 1990.
The Cereal Price Index, which includes prices of main food staples such as wheat, rice and maize, rose by 3.7 percent in February (254 points), the highest level since July 2008.
The FAO Dairy Price Index averaged 230 points in February, up 4 percent from January, but well below its peak in November 2007.
The FAO Oils/Fats Price Index rose marginally to 279 points in February, a level just below the peak recorded in June 2008.
The FAO Meat Price Index averaged 169 points in February, up 2 percent from January. By contrast, the FAO Sugar Price Index averaged 418 points in February, slightly below the previous month but still 16 percent higher than February 2010.
Cereal supply and demand
FAO expects winter crops in the northern hemisphere to be generally favourable and forecasts global wheat production to increase by around 3 percent in 2011.This assumes a recovery in wheat production in major producing countries of the Commonwealth of Independent States. So far, conditions of winter crops in those countries are generally favourable.
The latest estimate for the world cereal production in 2010 is 8 million tonnes more than was anticipated in December but still slightly below 2009. This month's upward revision reflects mostly higher estimates for production in Argentina, China and Ethiopia.
The forecast for world cereal utilization in 2010/11 has been revised up by 18 million tonnes since December. The bulk of the revisionZreflects adjustments to the feed and industrial utilization of coarse grains. Larger use of maize for ethanol production in the United States and statistical adjustments to China's historical (since 2006/07) supply and demand balance for maize are the main reasons for the revision.
