Global food prices hit a new record high (real and nominal terms) in January, surpassing the levels seen during the 2007-08 food price rise, according to the United Nations Food and Agriculture Organization. FAO said its food price index, a benchmark basket tracking the wholesale cost of 55 commodities, rose to 231 points, up 3.4 percent from December. The index, which began in 1990, measures monthly price changes for a food basket composed of cereals, oilseeds, dairy, meat and sugar.
"Prices of all the commodity groups monitored registered strong gains in January compared to December, except for meat, which remained unchanged," FAO said. U.N. food officials fear more political unrest as governments and companies pass to consumers the increase of up to 110 percent in global food prices.
"The new figures clearly show that the upward pressure on world food prices is not abating," said FAO economist Abdolreza Abbassian. "These high prices are likely to persist in the months to come. High food prices are of major concern especially for low-income food deficit countries that may face problems in financing food imports and for poor households which spend a large share of their income on food."
On the same subject, World Bank President Robert Zoellick says the world faces a broader trend of increasing food and commodity prices and more countries should wake up to the need to curb price volatility. He said increased consumer demand, especially for sugar and meat, in fast-growing emerging economies was a major factor pushing prices higher compared with the 2007-08 crisis. "We believe that while there are differences from the 2008 period, one core policy issue that is the same is that it looks like it will be a very tough year for the chronically malnourished," Zoellick added.
Zoellick wants the Group of 20 (G-20) nations to recognize a larger role for development banks, such as the World Bank, in changes dealing not only with the immediate needs of poor countries faced with higher food prices, but in improving agricultural productivity. He said politicians in rich countries did not always recognize the political and economic challenges higher food prices posed to developing countries.
World leaders, economists, lawmakers and others have and will continue to debate the causes of the recent food price acceleration. That was the case during past price rises. Some observers blame export restrictions, and a lack of information on current levels of some commodity stocks.
The General Agreement on Tariffs and Trade, the core treaty of the World Trade Organization, has since 1947 banned "prohibitions or restrictions" on exports of commodities. But it allows them when "temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential" to the exporting country. The language does not detail what is meant by "temporarily" or what is a "critical shortage."
Separately, the European Commission on Feb. 2 outlined an integrated strategy to counter protectionist measures such as export bans, while at the same time committing to determine whether speculation on financial markets is driving up commodity prices.
"The recent volatility in commodity prices threatens to increase inflation and global raw materials markets are becoming increasingly distorted due to protectionist measures," the Commission said. "In order to secure [a] supply of raw materials for the European industry for coming years we need to link this policy with our reforms of the regulatory framework for financial markets."
It is likely that experts at each of these international and multilateral institutions are very well aware how impractical, and unreliable, further deals to never, ever block exports would be, and how unmanageable international buffer stocks systems have proven to be. What can be serious, however, are efforts to better understand markets, better anticipate market trends, better police trading systems and broaden market participation.
