Food prices

The shoppers in Chongqing, China, died in a stampede for discounted cooking oil at a Carrefour store in November last year. At the same time in Morocco, dozens of people were hurt in clashes with police at a protest over high food prices. Around the world, the soaring cost of everything from milk to bread to meat is stocking inflation, threatening the poor with hunger and prompting politicians to impose price and export caps. The United Nations Food and Agriculture Organization’s global food price Index jumped 24% last year, the biggest gain since 1990. Donald Coxe, a global portfolio strategist at BMO Capital Markets has tracked commodities for over two decades, he recommends buying the stock. He also says that here will be another year of skyrocketing food prices and consumers all over the world will be hurt. “History as shown that when people have problems with food, governments can fall”. (http://www.financialpost.com/story.html?id=213343)

With stockpiles of grains including wheat and rice at the lowest in three decades, a scarcity of agricultural land in China and India surging demand for food in emerging markets, prices may keep rising even higher in the future. According to the International Monetary Fund, last year, as much as 40% of the global gain in soybean and meat consumption came from China. However weather also plays a part; drought in Australia, the world’s third biggest dairy exporter, hurt milk supplies. According to CMA (A German agriculture marketing firm) the amount dairies in Germany pay to farmers for a liter of milk rose 22% last year.

With the biofuel boom, which diverts corn used for food and animal feed, is making goods such as Mexican tortilla and American meat more expensive. US ethanol production alone counted for about 60% of the global increase in corn consumption in 2007 according to the International Monetary Fund.

Global food inflation is being driven by this strange attempt to take the food out of the tables and give it to the cars. Rising crude prices mean that customers won’t find much relief buying imported goods. In some nations, where some people may spend more than half their income on food, a small jump in prices may mean more hunger, which Governments might rush to impose caps. In India for example, the Prime Minister announced a plan in the end of last year to set aside more land for grain after higher prices for onions and wheat cost. In Russia the Government has proposed limiting grain exports, and Venezuela ordered its state oil company to plant soybeans and build food processing plants.

Food prices are clearly adding to the stress in developing countries today, on top of the other financial crises. We need to be more prepared for an agricultural point of view.