Rising Food Prices: 10 Questions Answered
Food prices are grabbing headlines again. The latest figures show that prices have surpassed the peaks reached at the height of the high food price crisis in 2008. For now, the world is not experiencing a repeat of that crisis. But concerns remain because prices are expected to remain high for several months.
ROME -- The causes and the effects of the current high food prices are diverse. To help you get a grasp of what it all means, here are the answers to 10 key questions:
1. How high are food prices really?
The global food price index produced by the UN Food and Agriculture Organization (FAO) reached 231 points in January, higher than the previous peak of 213.5 reached in 2008. It’s the highest value recorded since FAO first developed this index in 1990 (see table below).
2. So it’s going to be worse than 2008 then?
Not necessarily. Supplies of major food crops are more plentiful than two years ago, mainly because of much larger reserves. Reserves of rice, wheat and white corn (the most important staple food crops in many vulnerable countries) are adequate and that lessens the risk of a repeat of the 2007/08 crisis.
3. Any other differences between now and 2008?
In 2008, prices were driven partly by high oil prices that peaked at more than $150 a barrel. Current oil prices have now passed $100 a barrel, the point at which the use of corn for biofuel production becomes much more viable. The cost of oil affects the cost of fertilizers and transport – both key factors in food costs.
4. When did prices start rising again?
Drought and fires in Russia, followed by a government imposed export ban over the summer last year led to a period of rising wheat prices. The cost of yellow corn has also risen over the past six months due to lower than expected harvests, and an increase in the use of corn for biofuel production in the USA.
5. What’s the outlook?
The latest figures clearly show that the upward pressure on world food prices is not abating. These high prices are likely to persist in the months to come. The scale of planting of crops in 2011 will be critical in setting the tone for stability in international markets.
6. Who is going to be hit hardest?
High food prices are a problem for poor countries that have to import a lot of food to feed their populations. If imports cost more, these countries could struggle to buy the food they need. Taken down to a human level, high prices are a problem for any household that spends most of its income on food. In many of the world’s developing countries, people spend 60-80 percent of their income on food.
7. Aren’t high food prices good for poor farmers?
High food prices could represent an opportunity for people who make a living from agriculture. The trouble is that many of these people don’t produce enough food even for themselves, let alone to sell any. Many do not have access to the markets where prices are higher nor the resources they need for inputs like fertilizer to increase their yields.
8. How do high food prices affect WFP?
More than half of WFP’s food is purchased with cash donations, so higher prices will mean less food for the hungry.
9. How much food does WFP buy?
In 2010, WFP bought $1.25 billion worth of food commodities. Of that, $975 million came from developing countries. Around 39 percent of the food bought was wheat and 18 percent corn. Cereal prices have risen 50% since July 2010.
10. Any reasons to be cheerful?
It’s encouraging that these issues will be firmly on the agenda of the G20 meetings this year, along with ways to address possible reactions such as export bans. Bans should not be allowed to impact humanitarian work. Governments are also expected to discuss the possibility of establishing food reserves close to potentially food-insecure areas.