Posted on behalf of Barbara Casassus
World food prices reached a new record high last month, exceeding the 2008 peak that triggered riots in a number of countries, the UN’s Food and Agricultural Organisation (FAO) reports.
The Food Price Index, which covers dairy products, meat, sugar, cereals and oilseeds, averaged 214.7 points at the end of December 2010, up almost 4.2% from 206 points a month earlier and slightly above the previous peak of 213.5 points in June 2008. This was the highest it had reached since the index was created in 1999.
Sugar, cereals and oil were the driving force in the rise, the report says. The cause was droughts in Russia and “many other unexpected developments that hit crops around the world”, FAO economist Absolresa Abbassian told the BBC.
Abbassian does not expect the same social unrest to follow the latest price peak, because farm production in developing countries is stronger, but adds that food stocks in certain products have been drawn down quite heavily, so that “we have left ourselves with very little buffer”.
More volatility is probably on its way, partly because of fears that reserves are insufficient, he predicts. Bad news will have more impact than usual on prices and good news will be regarded with scepticism. As a result, “market sentiment will be quite an important factor in determining price levels—at least until the next harvest”, he adds.
The picture is also gloomy on the oil front. The International Energy Agency has warned that the current high crude prices would undermine the world economic recovery this year. They are “entering a dangerous zone”, IEA chief economist Fatih Birol told the Financial Times.
The value of oil imports into the industrialised countries of the Organisation for Economic Cooperation and Devleopment (OECD) have increased 30% in the past year to $790 billion.
For more, see Nature’s Food Special from last year.