World food prices now at their highest level in 20 years - UN

ST. LOUIS (AP) – Prices for major crops climbed Thursday as a UN agency said food costs are now at their highest point since the agency began tracking them 20 years ago.

Global prices have surged 2.2 percent just in the past month, according to the UN’s Food and Agriculture Organization in Rome. The FAO’s index, which measures the price of staple food items and big commercial crops like corn and soybeans, reached its highest level since 1990.

The price increases have been driven by cereals, meat and dairy products. After rising for eight months, global prices of corn, wheat and soybeans are near record levels set in 2008, when riots erupted in countries like Haiti and US food prices jumped.

In the developing world, the effects have been dire. Higher food prices have pushed an estimated 44 million people into extreme poverty. Economists think the problem could worsen as governments curtail grain exports to increase their own stockpiles.

At the heart of the problem is rising demand for crops. New middle-class consumers in China and India are eating more grain and meat than ever. At the same time, a burgeoning ethanol industry in the United States is consuming about 40 percent of the entire corn crop.

“Stock levels have run down, and that’s partly for policy reasons,” said David Hallam, director of FAO’s trade and market division, referring to mandates in the United States for how much corn-based ethanol must be used in gasoline.

“There isn’t much of a cushion there.”

Higher oil prices have complicated the problem. Oil prices can drive up food prices by raising the cost of transportation and production for farmers and food processors. Higher gasoline prices also encourage ethanol producers to buy more corn and blend it into fuel. That can further raise corn prices.

“This is what happened in 2007-2008,” said Abdolreza Abbassian, a senior economist with the UN Food and Agriculture

Organization. “The longer these prices remain high, the more we have to think that it could have a spillover effect into the grain

sector, especially in coming weeks and months.”

On Thursday, corn contracts for May delivery jumped 15.5 cents to $7.3675 a bushel. The record high is $7.65, set in 2008. Soybeans rose 17.75 cents to $14.12 a bushel. And wheat rose 12.25 cents to $8.2350 a bushel.

The FAO index records monthly changes in international prices of a basket of food commodities. That basket includes cereal, oils and fats and sugar.

Oxfam, an international aid group, urged governments to try to rein in food prices. It suggested doing so by curbing the ability of speculators to trade in commodity markets while limiting the amount of grain used for ethanol production.