FAO predicts hard times

With Daniel Nonor

The year 2011 is going to be a tough one, as food prices have risen to record levels worldwide. This food crisis will hit-hard at both developed and developing countries. According to an Economist at the United Nations’ Food and Agricultural Organization (FAO), Abdolreza Abbassian, “We are entering a dangerous territory”.

The FAO’s food price index, a formula based on the wholesale price of 55 products, including rice, meat, wheat, milk and cheese, reached a record high in December 2010. The index has risen in each of the past six months, and it hit 214.7 in December.

The previous record was 213.5, set at the height of the food crisis in June of 2008, when soaring prices led to riots in several countries such as Haiti, Somalia and Cameroon, while others, including India and Vietnam, restricted rice exports.

“There is still room for prices to go up much higher, if for example, the dry conditions in Argentina tend to become drought, and if we start having problems with winterkill in the northern hemisphere for the wheat crops,” Mr. Abbassian said, and added “I am feeling less optimistic than I was in November – we have not had much good news.”

One key difference between the current price run-up and the 2008 food crisis is the price of oil. It is currently around $92 (U.S.) a barrel, whereas it topped $147 in 2008. Fertilizer prices are also lower, as is the price of rice, a key food staple in many countries. The current trend, though, is worrisome, he said.

“But we could have bumper crops everywhere and the prices could collapse – you never know – but at the same time, high prices are not going to go away and there is a strong possibility that they might remain high for two years”, Mr. Abbassian lamented.

Prices for many agricultural commodities started rising last fall largely because of poor grain crops in Canada, Russia and Ukraine. They have spiked even higher recently, because of dry weather in Argentina, a major soybean producer, and flooding in parts of Australia, which has wiped out many wheat crops.

The price of wheat has jumped about 17 per cent in the last month, while corn is up 11 per cent. Both are now close to two-year highs. Other food staples have been soaring as well, including canola, up 43 per cent last year, and sugar, which hit 30-year highs.

“The price spike has raised fresh concerns about food price inflation,” said Kenrick Jordan, a Senior Economist at the Bank of Montreal. Mr. Jordan said while the impact will be manageable for developed countries: “In developing countries, where food accounts for a much more significant part of household budgets, the inflation threat is much greater.”

The tight supply situation is expected to get worse. The FAO estimates food production will have to increase by 70 per cent by 2050 as the world population expands to 9.1 billion people from about 6.8 billion people in 2010.

Consumers in Ghana will start feeling the impact as well. Food prices in the country have remained high. Though, the country experienced seemingly bumper harvest last year, according to the Ministry of Food and Agriculture.

Coupled with recent hikes in petroleum products, most Ghanaians have started feeling the pinch of the global food crisis.

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