Global food prices up again

by Bryan Salvage
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ROME — Global food prices are on the rise again. According to the Food and Agriculture Organization of the United Nations’ (F.A.O.) Food Price Index, a food basket composed of meat, cereals, oilseeds, dairy and sugar has now registered increases four months in a row.

However, market conditions are not the same as those that triggered the food-price crisis that started two years ago, F.A.O. relayed in its December Food Outlook report. In November, the index averaged 168 points, the highest since September 2008. That was still 21% below its peak in June 2008. Before the price spike of 2007-08, the index never exceeded 120 points and, for most of the time, was below 100 points.

Global meat prices were an average 8% lower in the first 10 months of 2009 than during the same period last year, according to the F.A.O. meat price index. Lower global imports are expected to depress world trade in all various meat categories in 2009, but a modest recovery is expected in 2010.

"At the onset of the price surge in 2007, F.A.O. identified a number of possible causes contributing to the price rise: low levels of world cereal stocks; crop failures in major exporting countries; rapidly growing demand for agricultural commodities for biofuels and rising oil prices," the F.A.O. study said. "As the price strengthening accelerated, several other factors emerged to reinforce the upheaval; most importantly, government export restrictions, a weakening U.S. dollar and a growing appetite by speculators and index funds for wider commodity portfolio investments on the back of enormous global excess liquidity. What made the 2007-08 price spike exceptional was the concurrence of so many factors culminating in an unprecedented price rally and the fuelling of volatility."

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