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World food prices climb to record as UN sounds alarm on further shortages
Wednesday, 09 March, 2011, 08 : 00 AM [IST]
By Rudy Ruitenberg
Global food prices rose to a record in February and grain costs may continue to rise in the next several months, with only rice keeping the world from a repeat of the crisis three years ago, the United Nations said.

An index of 55 food commodities rose 2.2 per cent to 236 points from 230.7 in January, the eighth consecutive gain, the UN’s Food and Agriculture Organisation said. Wheat rose as much as 58 per cent on the Chicago Board of Trade in the past 12 months, corn gained 87 per cent and rice added 6.5 per cent.

“I’ve never loved rice more than now,” Abdolreza Abbassian, a senior economist at the FAO in Rome, said by phone. The grain is the staple food of more than half of the world population, according to the International Rice Research Institute. “Probably rice is the commodity which is separating us from a food crisis,” Abbassian said.

Rising food costs contributed to riots across North Africa and the Middle East in the last several months that toppled leaders in Egypt and Tunisia. Prices surged as bad weather ruined crops from Canada to Australia and Russia banned grain exports after its worst drought in a half-century.

$100-a-barrel oil

Turmoil in oil-producing countries including Libya had pushed crude above $100 a barrel, which would drive corn and wheat prices even higher, Abbassian said. Higher crude prices would make biofuels produced from crops more competitive while raising the cost of tractor fuel and fertilizer for farmers.

“As long as oil prices remain high, it would start putting heavy pressure on the market, first through corn and then spilling over to other markets,” Abbassian said. “There’s no sign of rationing for cereals. I don’t see a correction.”

Global food prices probably will rise in the first half of this century because of an expanding population and higher incomes, slower crop-yield growth and the effect of climate change, Ross Garnaut, the Australian government’s climate-change adviser, said.

“The hike in food prices is deeply worrying,” Thierry Kesteloot, a food-policy adviser at Oxford, England-based hunger-relief charity Oxfam, said in an e-mailed statement. “Millions more people are sliding into poverty as they struggle to afford basic food supplies, and more and more are at risk of going hungry.”

Forced Into Poverty

Even without a crisis, the number of undernourished people in the world would rise this year from 925 million in 2010 as food costs gain, Abbassian said. He gave no estimate. The World Bank said last month 44 million people had been forced into extreme poverty since June by food inflation.

Food output will have to climb by 70 per cent between 2010 and 2050 as the world population swells to 9 billion and rising incomes boost meat and dairy consumption, the FAO forecasts. Producing 1 kg (2.2 pounds) of pig meat can take 3.5 kg of feed, US Department of Agriculture data shows.

“You now need a very good 2011 crop, and if we don’t get that, I’m not very optimistic about 2011-12,” Abbassian said. “There hasn’t been a food crisis per se, anything comparable to 2008. With stocks being drawn down, for 2011-12 we’ll have to be far more cautious.”

The UN’s food-price index rose 34 per cent from 175.9 points a year earlier, with all five food groups advancing.

Dairy Prices

The dairy index climbed to 230 points in February from 221.3 in January. Milk futures traded in Chicago jumped 15 per cent last month following a 26 per cent surge in January, the biggest gain since March 2004.

The FAO’s sugar-price index slipped to 418.2 points from a record 420.2 in the previous month. Raw-sugar prices climbed 37 per cent in New York in the past year.

The gauge for meat rose to 169.5 points from 166.2. Meat is a “significant” part of the diet in developed countries, which may see more food inflation than in 2007-08, according to Ken Ash, trade and agriculture director at the OECD.

A gauge of cooking oils and fats gained to 279.3 points from 277.7, the FAO said. Its cereal-price index climbed to 253.8 points from 244.8 in January, the highest level since July 2008, the report showed.

World grain production in 2010-11 is forecast to drop 1.1 percent to 2.24 billion metric tons, the UN agency said, compared with December’s outlook for a 2.23 billion-ton crop. It estimated cereal usage at 2.28 billion tons, exceeding production.

Wheat Crop

The FAO cut its projection for ending stockpiles to 479 million tons from December’s 525 million tons following an adjustment of historical Chinese corn inventories.

The global wheat harvest will come to 654 million tons, compared with a previous outlook of 653 million tons, the FAO said. Production of coarse grains including corn and barley will be 1.12 billion tonnes, and milled-rice output will be 466 million tonnes, it said.

Countries probably spent at least $1 trillion on food imports in 2010, with the poorest paying as much as 20 per cent more than in 2009, the UN has said. Two-third of the world’s hungry are “largely reliant” on rice as a staple, according to Ash at the Organisation for Economic Cooperation and Development.

-- Bloomberg
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