World food prices are now at an historic high.
Even higher than they were in mid 2008 before the Recession hit hard. They are currently at the highest level, both in real and nominal terms, since the UN Food and Agriculture (FAO ) started tracking the food price index. And the FAO predict that these high prices are likely to persist.
High food prices are of major concern, especially for low-income food-importing countries which then face problems in financing food imports and for poor households that spend a large share of their income on food.
High food prices impact poor households in a disproportionately harsh manner as they spend a larger share of their income on food, and for poor countries which need to import food there are problems in the cost of importing food.
Some countries are seeing price rises that are hugely severe. In Pakistan inflation rose from 12% to 33% in a 3 year period, on the back of a surge in food prices .
In Saudi Arabia food prices rose 9% over the last year. In India food prices were up 13.5% in the year 2010. In Sri Lanka as they face yet another flood, up to 90% of their rice crop is threatened.
Food prices have the most impact on people with a low income, and have been part of the cries from protesters in Tunisia, Egypt and Algeria, Yemen, Morocco and Jordan in recent weeks. This area, North Africa and the Middle East, is the world’s largest importer of cereals, especially wheat, so it feels the impact of higher prices more acutely.
These figures make last years predictions from the OECD and the UN Food and Agriculture Organisation that food prices will rise by 40% over this coming decade seem almost conservative.
The current, and projected, rise in food prices is leading to major land grabs, most noticeable in Africa, and sometimes at prices as low as $1 an acre, as countries seek to secure food for their own populations for future years. China, Saudi Arabia and some other Gulf states are both buying large tracts of land in Africa to ensure that they can feed their people.
Food importers are vulnerable to actions of countries many miles away. When food exporting nations decide to place export bans on food, as happened in 2007 when Russia and Argentina banned export of grain, it sends shock waves around the world.
If we add to the equation some of the food losses through recent floods, and extreme weather events, and access to water we have a volatile situation.
One of the issues for this decade is food. It will be an interesting and volatile issue mixed with a strong “youth bulge” in the demography of many countries. While the logic of the connection of young populations who have suffered years of repression and have been given no stake in their own communities and high food prices seems intuitive there may well be other factors that are at play. The psychological impact of high food prices, which put the necessities of life beyond the reach of people, should not be underestimated.
And then add the expected population increase to 9 billion- it’s a hard equation.
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