Global food prices rose sharply in December, following an increasing trend that brings them close to levels that led to shortages and riots three years ago in developing countries.
February marked an eleven-month trend of new monthly highs for food prices. Prices for grain alone have increased dramatically with wheat elevating over 55 percent and corn nearly 90 percent in the past year. This trend may continue over subsequent months causing increased stress within developing countries. In recent months, rising food costs contributed to riots across North Africa and the Middle East that toppled leaders in Egypt andTunisia.
Some economists are claiming that many factors, like substantial stockpiles of grains, might prevent a serious problem, but prices are expected to remain high this year as bad weather has affected some commodity crops in exporting countries, causing prices to surge and triggering a domino effect. In one case, Russia banned grain exports after its worst drought in a half-century, causing importers in North America and the Middle East to cling to supplies. More recently, heavy rains in Australia and harsh, dry conditions in Argentina and the United States are expected to hurt the winter wheat crop.
Only rice, a primary food for more than half the world’s population, remained stable, a gift of hope to those dependent on this staple during a precarious global food situation. This hope was jeopardized when an earthquake, a tsunami, and a nuclear disaster befell the northeastern region of Japan, where most of its rice agriculture occurs. Now the stability of rice prices seems less certain.
Following the nuclear disaster, Japan’s exports have all but halted as reports of radioactive produce and goods have accumulated. Russia, Australia, Singapore, Canada and others have banned food imports from at least the four prefectures nearest the nuclear plant. A report from Hong Kong’s Vegetable Marketing Program shows that wholesale prices of Chinese produce have risen 20 percent as panic has forced Japanese consumers to buy outside the country. Tests on Japan’s water have found unsafe levels of radiation, forcing the government to distribute bottled water to its citizens. With Japan’s exports halted and its own citizens relying heavily on food imported from China and elsewhere, its agricultural economy, particularly in the northern rice-growing regions, will undoubtedly suffer while the global community can only wait to learn what this will mean for the global food situation.
United States food price inflation has remained relatively low and price increases are only predicted at 2 to 3 percent this year. But in poorer countries relying on imports, the prices swing in a broader arc. Large, unexpected swings in food prices endanger the nutrition of poor households in developing countries, who spend as much as 70 percent of their incomes on food. The crisis situation of 2007 and 2008, which included high petroleum prices, increasing global demand for food, and poor harvests, pushed food prices in poorer importing countries and ultimately led to shortages and deadly riots. But with December 2010’s index reaching higher than the previous peak in June 2008, the current situation is not so different.
“The concern is that the long duration of the high prices for the months to come may eventually result in these high prices reaching the domestic markets of these poorer countries,” said Abdolreza Abbassian, an economist for the United Nations Food and Agriculture Organization. “In the event of that, there is the chance of the repeat of the events of 2007 and 2008.”
Still, a repeat can be prevented. Africa, for instance, produced good harvests from crops planted last year, reducing their reliance on imports. Their grain prices remain well below the highs they hit in 2007 and 2008, and export prices for rice (not accounting for Japan’s tragedy) have stayed 40 to 50 percent below those highs. This factor is significant because, according to Mr. Abbassian, grain prices have a much greater impact on the food budgets of people in poor countries than prices for commodities like sugar or meat. In addition, global supplies of wheat and rice are much larger today than during the past crisis. While it’s unclear how profound the effect of Japan’s crisis will be on the world food issue, it leaves us wondering how sustainable our food system is when tested by our planet.