News / Economy

World Food Prices Hit New Record

World food prices have hit a new record, according to the U.N. Food and Agriculture Organization's index of globally-traded food commodities. The FAO index rose 3.4 percent in January, its seventh straight month of increases.

Sugar and oils are leading the current run-up on the FAO's food commodities index. But wheat, rice, and maize are not far behind. The FAO's grains index is just 11 percent below its April 2008 record.

A major cyclone in Australia is just the latest bout of bad weather affecting harvests in recent months. It follows last year's drought in Russia, a U.S. heat wave, floods in Canada, and recent dry weather in Argentina.

"The harvest situation has been very bad this year. And it was very bad already in the second part of last year. And we are starting the year with very low stocks, which [are] the reserves you can rely upon when you face bad crops," said Concepcion Calpe, a senior economist at FAO.

While reserves are low, demand is growing as the world comes out of an economic recession.

Demand is also up for maize in the U.S., sugar cane in Brazil, and plant oils in Europe because of rapidly increasing biofuels production, says Purdue University agricultural economist Chris Hurt. "This demand is very strong relative to our ability to supply it. And then when we do have setbacks on weather, these are some of the consequences that we could anticipate," he said.

Experts say one consequence of rising food prices is likely to be more widespread hunger. After the previous food price spike in 2008, FAO estimates that roughly 100 million additional people went hungry.

Civil unrest could be another consequence, especially in low-income countries that rely heavily on food imports, says Calpe. "And of course, the government tries to avoid these kinds of tensions by importing food so as to make sure that at least people won't go protest because they don't have enough food," he said.

High food prices have already been a factor in protests in North Africa this year. Calpe says Algeria is importing large amounts of grain at high prices, which is pushing prices up still further.

Attention is turning back to the northern hemisphere as farmers prepare their spring crops. Hurt says normal harvests would help moderate prices, but it all depends on the weather. "That's not something any government or any group of people can determine: what the weather's going to be," he said.

Hurt adds that experts believe ongoing climate change means a future of more extreme weather.

In the months to come, FAO predicts high food prices will continue. Experts say in the long run, bringing prices down will require countries to re-invest in agriculture, after years of decline.

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