News outlets examine potential implications of record high food price levels

Jan 7 2011

Though world food prices "jumped to a record high" in the U.N. Food and Agriculture Organization's (FAO) latest index, the agency "is drawing comfort from the absence of widespread riots, usually the defining element of a food crisis," the Financial Times reports looking at the factors that have led some food prices to rise significantly without sparking international panic. "To an outsider, the relative calm, compared with riots in more than 30 countries three years ago, is striking. But a closer look reveals big differences to the situation then, differences that make clear why the world is not facing a crisis. At least not yet," the newspaper writes.

Rice, which is considered one of the two most important staples for food security, is below the peaks experience during 2007-2008, according to the FAO's Abdolreza Abbassian. "The cost of wheat, the other staple critical for global food security, is rising, but has not yet surpassed the highs of 2007-08," according to the Financial Times. "The surge in the FAO food index is principally on the back of rising costs for corn, sugar, vegetable oil and meat, which are less important than rice and wheat for food-insecure countries such as Ethiopia, Bangladesh and Haiti."

"At the same time, local prices in poor countries have been subdued by good harvests in Africa and Asia," the newspaper writes. It also helps that African countries have reaped "good crops" this season, according to Maximo Torero of the International Food Policy Research Institute. "Three years ago, a large number of poor countries had harvested mediocre crops, forcing governments to tap the global market to bridge the shortfall in domestic production. This pushed up domestic prices and triggered riots. Food aid and agriculture officials say that as long as African and Asian countries do not need to import produce, the impact of rising global prices will remain limited. But a string of bad crops, perhaps because of poor weather, could change that outlook," the newspaper notes (Blas/Manson, 1/5).

The New York Times also examines the outlook for the rise in the FAO's Food Price Index. "Prices are expected to remain high this year, prompting concern that the world may be approaching another crisis, although economists cautioned that many factors, like adequate stockpiles of key grains, could prevent a serious problem," the New York Times writes.

In the piece, Abbassian discusses the factors distinguishing the current price rises from the ones during 2007-2008. International supplies of rice and wheat are much more plentiful today than they were between 2007 and 2008. "But ensuring sufficient grain supplies depends on good harvests this year in major exporting countries. Dry conditions in Argentina that could hurt corn, and soybean crops are worrisome, Mr. Abbassian said. Heavy rains in Australia delayed the wheat harvest there, resulting in a poorer crop. In the United States, harsh, dry weather is expected to hurt the winter wheat crop."

Gawain Kripke, policy director of Oxfam America, and Joseph Glauber, the Agriculture Department's chief economist, are quoted in the piece (Neuman, 1/5).

"The potential humanitarian, political and business impact [of rising food prices] - particularly in impoverished states where food makes up the largest component of the inflation basket - is already alarming policymakers and senior officials," Reuters writes in a story examining the rise in food prices. "So far, experts say weather-related supply shocks ... were largely to blame [for the increases]. But they worry politics and markets could soon take over to produce a vicious circle," according to the news service.  

"The danger is that what happens now is that you get a second shock as countries can respond by imposing export bans and financial markets investors pile in for short-term investment, pushing prices much higher, as they did in 2008," said Maximo Torero, divisional director for markets, trade and institutions at the International Food Policy Research Institute (IFPRI). "Clearly what is needed is to increase production through appropriate investment in agriculture, to increase the information on stocks around the world, strengthen the regulation of the futures markets and to have safety net mechanisms to protect the poorest consumers," he said.

The article includes the perspective of political risk insurers. A senior underwriter in the London political risk insurance market said, "The potential is there for food riots and also for governments to take action such as embargos on food exports or nationalisation of assets involved in food production or storage in order to protect their people - not always necessarily for the sake of altruism but often to preserve their position as governments in office."

Food shortages in 2008 prompted some wealthy governments to purchase farmland in emerging markets. Some deals are controversial and local tensions could flare up. "The main risks will come where they are in an area where the population is short of food themselves and the deal is seen as being in some way inappropriately negotiated," said Jonathan Wood, a global issues analyst at Control Risks. "So many of these projects are in East Africa: Ethiopia, Kenya, Tanzania. But a lot will depend on the individual deal," he said.

James Bond, chief operating officer of the World Bank's political risk insurance arm the Multilateral Investment Guarantee Agency, is also quoted in the article (Apps, 1/6).

NPR Reports On Rising Food Prices In China, India

"Inflation in China hit a two-year high of 5.1 percent in November, and food prices have soared. For China's leaders, tackling inflation without slowing growth too fast is a tricky task, with high stakes. The papers are full of horror stories: Rice prices jumped 30 percent in just 10 days; peppers soared an unbelievable 1,000 percent," NPR's Morning Edition reports. The piece looks at why prices have gone up and how the government is trying to deal with the situation (Lim, 1/6).

"Consumers in India are being stretched by a surge in food prices, which rose by more than 14 percent in December alone. ... Analysts blame crop failures and a food distribution system that allows middlemen to manipulate food prices," NPR's Morning Edition reports. The story examines how food price surges are affecting India's poor and looks at some of the factors driving up prices (Flintoff, 1/6).