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Food prices hit record high

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.

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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.

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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.

Comments

  1. Report this comment

    Uncle Al said:

    The US Consumer Price Index (CPI) doe not include fuel or energy. These two commodities are each and together too minuscule to include in the CPI that determines Cost of Living Adjustments (COLA) in public contracts like Social Security paid to retirees.

    They are “entering a dangerous zone” Nonsense. We have full assurance from Washington that personal costs of food and fuel do not matter in the slightest. Massive increases in food and fuel costs bring economic prosperty, hence Washington’s avid pursuit of both.

    http://www.bls.gov/news.release/cpi.nr0.htm

    “Over the last 12 months, the index for all items less food and energy

    has risen 0.8%." See! “The energy index has risen 3.9%” “food at home index up 1.7%”

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