World food crisis looms as prices soar to record high

Philip Haddon – City Wire February 4, 2011

World food prices surged to an all time high last month on the back of extreme weather conditions and unrest in the Middle East.

The United Nation’s Food and Agriculture Organisation (FAO) Food Price index rose for the seventh month in a  row. It now stands at 231, well above the last record high of 224.1 in June 2008 and the highest since records began in 1990.

And there was a stark warning from the FAO that these high prices will remain high for some time.

Abdolreza Abbassian, an economist at the organisation, said: ‘The new figures clearly show that the upward pressure on world food prices is not abating. These high prices are likely to persist in the months to come.’

Meanwhile, in an interview with Reuters, World Bank President Robert Zoellick said: ‘We are going to be facing a broader trend of increasing commodity prices, including food commodity prices.’

There are a number of factors across the globe which are exacerbating the situation.

Capital Economics’ Julian Jessop fears the uprising in Egypt could have severe implications for food prices after the unrest helped push oil above the $100 mark.

Jessop said:  ‘Extreme weather conditions last year damaged crops in many parts of the world, notably harvests of wheat and sugar. The resulting increases in food prices have contributed to social unrest in many countries, including in Egypt. Governments in the rest of the Middle East and elsewhere, fearful of contagion, are responding by restricting exports of agricultural commodities and/or increasing imports to add to precautionary stockpiles.’

A massive snowstorm in the United States and floods in Australia are among the forces of nature which could push prices up further.

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