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Fears of new food crisis as prices soar

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The bill for global food imports will top $1,000bn this year for the second time ever, putting the world “dangerously close” to a new food crisis, the United Nations said.

The warning by the UN’s Food and Agriculture Organisation adds to fears about rising inflation in emerging countries from China to India. “Prices are dangerously close to the levels of 2007-08,” said Abdolreza Abbassian, an economist at the FAO.

The FAO painted a worrying outlook in its twice-yearly Food Outlook on Wednesday, warning that the world should “be prepared” for even higher prices next year. It said it was crucial for farmers to “expand substantially” production, particularly of corn and wheat in 2011-12 to meet expected demand and rebuild world reserves.
But the FAO said the production response may be limited as rising food prices had made other crops, from sugar to soyabean and cotton, attractive to grow.

“This could limit individual crop production responses to levels that would be insufficient to alleviate market tightness. Against this backdrop, consumers may have little choice but to pay higher prices for their food,” it said.

The agency raised its forecast for the global bill for food to $1,026bn this year, up nearly 15 per cent from 2009 and within a whisker of an all-time high of $1,031bn set in 2008 during the food crisis.

“With the pressure on world prices of most commodities not abating, the international community must remain vigilant against further supply shocks in 2011,” the FAO added. In the 10 years before the 2007-08 food crisis, the global bill for food imports averaged less than $500bn a year.

Hafez Ghanem, FAO assistant director-general, dismissed claims that speculators were behind recent price gains, saying that supply shortages were causing the rise.

Agricultural commodities prices have surged following a series of crop failures caused by bad weather.

The situation was aggravated when top producers such as Russia and Ukraine imposed export restrictions, prompting importers in the Middle East and North Africa to hoard supplies. The weakness of the US dollar, in which most food commodities are denominated, has also contributed to higher prices.

FAO food price indexThe FAO’s food index, a basket tracking the wholesale cost of wheat, corn, rice, oilseeds, dairy products, sugar and meats, jumped last month to levels last seen at the peak of the 2007-08 crisis. The index rose in October to 197.1 points – up nearly 5 per cent from September.

Agricultural commodities prices have fallen over the past week amid a sell-off in global markets, but analysts and traders continue to expect higher prices in 2011.


2 Comments on "Fears of new food crisis as prices soar"

  1. KenZ300 on Fri, 19th Nov 2010 7:02 am 

    World population growth.

    The elephant in the room.

    In a world of 5 billion people resources were plentiful. In a world of 9 billion people there are limited resources.

    How many fish can you put in a fish bowl before they attack each other?

  2. Edpeak on Sat, 20th Nov 2010 7:27 am 

    Ken, I like most of your posts, but..

    Number one, People were murdering each other when population was 0.1 billion and less

    Also population is where I agree we need to act to help it peak and stabilize at least, and maybe then choose to let it decline. But guess what? It has already gone down from well over 2% per year increases in the 1960s to just about 1% per year increases now, that’s a huge step, many steps in the right direction.

    this now needs to continue, but we’re headed in the right direction.

    What about growth of emissions per person? The opposite is true, it’s accelerating, and no one is talking (ok almost no one, some on these boards) but no one in power is acting and almost no one is even talking about the need to let growth peak and then stabilize (emissions per person but also GDP generally as a terrible way to measure economic health)

    So even if population stayed FLAT starting tomorrow, then exponential growth of use of oil, gas, energy generally, metals, water, etc, etc, would keep increasing exponentially year after year and no one is even TALKING about it, no on in power heading government, about changing to a non-growth economy, making this the real elephant, not-talked-about elephant in the room.

    The other one, population, we’re not just talking about, we’re ACTING on it already and have had a huge success which we need to see through to the end. We also have plans and know how to finish the success: more family planning and contraception, getting annual growth rate down to no growth in population.

    This one, growth, we’ve just increased the rate of increase to accelerate and aren’t acting or even talking about plans of how to change it.

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