A recent report by The Food & Agricultural Organisation of the United Nations has warned that poor harvests and an expected rundown of global reserves could push food prices up by 10% to 20% over the next year. The FAO report has cast the bleakest forcast since the food crisis of 2007/08, which caused an extra 100 million hungry people around the globe and saw riots breakout in more than 25 countries.
Over the past few months foods, such as wheat and maize, have risen by up to 40%; with sugar prices surpassing 30-year highs and remaining both elevated and volatile. Meat prices have risen, but the increase has been far more contained so far. In the dairy sector, butter has already hit an all time high. Prices of internationally traded cassava have also soared to a record level this year, with production in 2010 now predicted to decline for the first time in 15 years.
A combination of price speculation, heavy trading on future markets and a devastating Russian harvest has led to food price inflation of up to 15% a year in some countries. The FAO has said that as prices rise, the international community will need to brace itself for food import bills in excess of $1 trillion.
“With the pressure on world prices of most commodities not abating, the international community must remain vigilant against further supply shocks in 2011,” FAO said.
“Given the expectation of falling global inventories, the size of next year’s crops will be critical in setting the tone for stability in international markets,” the FAO has said. “For major cereals, production must expand substantially to meet utilization and to reconstitute world reserves, and farmers are likely to respond to the prevailing prices by expanding plantings.
“Cereals however may not be the only crops farmers will be trying to produce more of, as rising prices have also made other commodities attractive to grow, from soybeans to sugar and cotton.
This could limit individual crop production responses to levels that would be insufficient to alleviate market tightness. Against this backdrop, consumers may have little choice but to pay higher prices for their food,” FAO warned.