The man who trades freedom for security does not deserve nor will he ever receive either. – Benjamin Franklin
Inflation in emerging markets is hitting food prices hard, and now we have raw data from the UN to confirm.
The latest report from the UN Food and Agricultural Organization shows prices are back at 2008 levels, and have increased for five months in a row.
The data evaluates 55 different food commodities, so it’s a pretty broad gauge of world costs.
Read moreGlobal Food Prices About To Break An All Time High (CHART OF THE DAY)
Prices of wheat, maize and many other foods traded internationally have risen by up to 40% in just a few months. Photograph: Simon Maina/AFP/Getty Images
The UN today warned that food prices could rise by 10%-20% next year after poor harvests and an expected rundown of global reserves. More than 70 African and Asian countries will be the worst hit, said the Food and Agricultural Organisation in its monthly report.
In its gloomiest forecast since the 2007/08 food crisis, which saw food riots in more than 25 countries and 100 million extra hungry people, the report’s authors urged states to prepare for hardship.
“Countries must remain vigilant against supply shocks,” the report warned. “Consumers may have little choice but to pay higher prices for their food. The size of next year’s harvest becomes increasingly critical. For stocks to be replenished and prices to return to more normal levels, large production expansions are needed in 2011.”
Prices of wheat, maize and many other foods traded internationally have risen by up to 40% in just a few months. Sugar, butter and cassava prices are at 30-year highs, and meat and fish are both significantly more expensive than last year.
Food price inflation – fuelled by price speculation, the searing heatwave in Russia in the summer and heavy trading on futures markets – is now running at up to 15% a year in some countries. According to the UN, international food import bills could pass the $1tn mark, with prices in most commodities up sharply from 2009.
Fidencio Alvarez abandoned his bean and corn farm in southern Honduras because of the rising cost of seeds, fuel and food. After months of one meal a day, he hiked with his wife and six children to find work in the city.
“We would wake up with empty stomachs and go to bed with empty stomachs,” said Alvarez, 37, who sought help from the Mission Lazarus aid group in Choluteca in January. “We couldn’t afford the seeds to plant food or the bus fare to buy the food.”
Honduran farmers like Alvarez can’t compete in a global marketplace where the costs of fuel and fertilizer soared and rice prices doubled in the past year. The former breadbasket of Central America now imports 83 percent of the rice it consumes — a dependency triggered almost two decades ago when it adopted free-market policies pushed by the World Bank and other lenders.
The country was $3.6 billion in debt in 1990. In return for loans from the World Bank, Honduras became one of dozens of developing nations that abandoned policies designed to protect farmers and citizens from volatile food prices. The U.S. House Financial Services Committee in Washington today explored the causes of the global food crisis and possible solutions.
The committee examined whether policies advocated by the bank and the International Monetary Fund contributed to the situation. Governments from Ghana to the Philippines were pressured to cut protective tariffs and farm supports and to grow more high-value crops for export, reports by the Washington-based World Bank show.
Haiti Pressure
The IMF pressed Haiti, as a condition of a 1994 loan, to open its economy to trade, Raj Patel, a scholar at the Center for African Studies in the University of California at Berkeley told the committee. When trade barriers fell, imports of subsidized rice from the U.S. surged, devastating the local rice farmers, Patel said.
“That is very odd,” said committee chair Barney Frank, a Massachusetts Democrat. “For anyone to have looked at Haiti at that time and thought that it was a functioning economy is a sign I think of ideology going rampant.”
“Of course they got it wrong,” said Robert S. Zeigler, director-general at the International Rice Research Institute, southeast of Manila. “It will work if you’re an extremely wealthy country and you can import rice at any price. But if you’re not an extremely wealthy country, I think that’s very poor advice.”
(AXcess News) – Gas pumps in the United States tell the same story as rice prices in Thailand: Inflation is a global phenomenon this year.
Oil hit a record $112 per barrel this week, and a United Nations official warned of continued pressure on food prices, which by one index are up 45 percent in the past year.
The challenges are worst in developing nations, where raw materials account for a larger share of consumer spending. But another factor – the sagging value of the US dollar – means that imports cost more in America and other nations that peg their currencies to the dollar.
Still, regardless of this currency phenomenon, several broad forces are pushing prices up.
After years of strong global economic growth, prices of oil, grains, and some metals have spiked. Investors are adding fuel to that fire by buying up hard assets like commodities, which are viewed as a hedge against inflation.
More fundamentally, many nations have been relatively loose in the creation of money supply. For all the news about interest-rate cuts by the Federal Reserve, this trend goes well beyond US shores.