Global Food Prices Reach Record High in February

04 March 2011

Global food prices reached a record-high level in February, driven mainly by higher prices for cereals, meat and dairy products. The increases have raised concerns that millions more people could be pushed further into poverty and civil unrest could result, according to the U.N. Food and Agriculture Organization.

The FAO said in a March 3 report that its Food Price Index rose for the eighth consecutive month in February, up 2.2 percent from January. This is the highest it has been since January 1990, when the index was first begun. The FAO price index measures monthly changes in international prices for a basket of food commodities, which includes cereal, oils and fats, dairy products, meat and sugar.

“Except for sugar, prices of all other commodity groups monitored registered gains in February with dairy products and cereals climbing the most,” the Rome-based agency said.

The monthly report said the following:

• The Cereal Price Index, which includes prices of main food staples such as wheat, rice and maize, rose by 3.7 percent in February, the highest level since July 2008.

• The FAO Dairy Price Index was up 4 percent in February from January, but well below its peak in November 2007.

• The FAO Oils/Fats Price Index rose marginally in February to a level just below the peak recorded in June 2008.

• The FAO Meat Price Index was up 2 percent in February from January. But the FAO Sugar Price Index in February was slightly below the previous month but still 16 percent higher than in February 2010.

The FAO said high food prices and the global economic recession pushed an additional 115 million people into poverty and hunger. By 2009, the total number of hungry people in the world had reached 1 billion, the FAO said. New global figures indicate that the number of hungry has fallen slightly to 925 million since then, the FAO said.

“And the cost of basic food staples remains high in many developing countries, making life difficult for the world’s poorest people, who already spend between 60 and 80 percent of their meager income on food,” the FAO said.

The State Department said in a fact sheet on international agricultural commodity prices that world wheat prices have jumped sharply over the last seven months.

“Global wheat production and quality have been plagued by adverse weather conditions in Russia, Europe, Canada and Australia,” the State Department said. “Supplies have been further constrained by export restrictions in Russia and Ukraine.”

U.S. corn export prices have risen by 70 percent since June 2010 as strong domestic and foreign demand compete for tightening supplies in the United States, Argentina and Brazil, the State Department said. By contrast, rice prices have moved upward modestly in the last seven months.

Another concern cited by the FAO is the sharp increase in global oil prices. Oil prices jumped to more than $100 a barrel across financial markets in February as the result of concern about supply disruptions in the aftermath of civil strife in Libya. Food prices are affected by oil prices, from the cost of food production to the cost of transporting the food to market.

“Unexpected oil price spikes could further exacerbate an already precarious situation in food markets,” said David Hallam, director of the FAO’s trade and market division. “This adds even more uncertainty concerning the price outlook just as plantings for crops in some of the major growing regions are about to start.”

The U.S. Agriculture Department has forecast that food prices will continue increasing over the long term, driven by rising demand from income growth in developing countries. It follows several decades of low commodity prices that discouraged investment and innovation in production technology.

In the 2007–2008 period, the spike in global food prices contributed to food insecurity worldwide and civil unrest in several nations, and generated appeals for food aid from 36 countries, the State Department said in a fact sheet.

After the sharp spike in food prices in that period, President Obama pledged $3.5 billion to help poor nations fight hunger by investing in agricultural development. What grew from that was the U.S. Feed the Future Initiative, which uses innovation, research and development to improve farm productivity, link farmers to local and regional markets, enhance nutrition and build safety nets, the State Department said.

“These investments will increase the supply of food where it is needed and help vulnerable people withstand price shocks better,” the department said in a fact sheet on the initiative. One of the positions of the Obama administration is that the United States will continue to provide food aid during crises, but help nations develop a lasting solution to end hunger with a long-term commitment to agricultural growth, the department said.