According to information compiled by the United Nations sourced from an index published by the (FAO) Food and Agriculture Organisation, food prices have been rising consistently for the past six months.
The index tracks monthly the cost of a basket of cereals, oilseeds, dairy, meat and sugar, indicating world food prices reached a record in December, surpassing the levels of 2008 when the high cost of food induced global riots. The recent floods in Queensland Australia adding further pressure on the worlds resources prompts warnings of prices being in “danger territory”.
The FAO food index hit 215 points last month, up from 206 in November, to break the 213.5 registered in June 2008. It shows a dramatic rise in prices for food in a decade. In 2000 the index stood at 90 and did not break through 100 until 2004.
Abdolreza Abbassian, FAO economist, told the Guardian: “We are entering a danger territory.” But he stressed that the situation was not yet as bad as 2008.
Abbassian warned prices could rise higher still, amid fears of droughts in Argentina plus the floods in Australia and cold weather killing plants in the northern hemisphere. At the same time demand from emerging countries such as China and India was strong.
Economists are on guard for spikes in inflation around the world, which might force up interest rates which in the developed world are at historically low levels as a result of the banking crisis.
Julian Jessop, chief international economist at Capital Economics, said: “The upward pressure on inflation this year from the recent surge in the cost of agricultural commodities will be much greater than that from the pick-up in oil prices”.
Jessop said the price of oil was rising largely as result of demand caused by a rebound in global industrial activity. “In contrast, the surge in agricultural food prices is largely a consequence of supply shocks, such as droughts in major wheat producing countries. These have been compounded by speculative pressures.”
Source: The Guardian/UK
