Global food prices near record high, warns World Bank

Global food prices are nearing a record high while ongoing volatility is putting the world’s poorest at risk, the World Bank said in a report published Monday.
The famine in the Horn of Africa, triggered by prolonged droughts in areas struggling with armed conflict and displacement, has been exacerbated by food prices which are approaching the all-time highs of 2008, the World Bank Group’s Food Price Watch warned.

According to the report, global food prices in July were an average of 33 per cent higher than a year before. Climbs in commodities such as maize, up 84 per cent; sugar, up 62 per cent; and wheat, up 55 per cent, all contributed to the increase.

A 45 per cent rise in crude oil prices since July 2010 has also affected production and transport costs, as well as the price of fertilisers, the latter soaring 67 per cent over the same period.

Prices from April through July settled around 5 per cent below the recent spike in February due to modest declines in grains, fats and oil, and meat, fruits, and sugar. But prices of other commodities remained volatile during this period, with maize and wheat prices declining in June before climbing in the first half of July.

“Persistently high food prices and low food stocks indicate that we’re still in the danger zone, with the most vulnerable people the least able to cope,” World Bank President Robert B. Zoellick said.

“Vigilance is vital given the uncertainties and volatility that exists today. There is no cushion.”

Global stocks remain alarmingly low, according to the report, which claims the stocks-to-use ratio for maize — to give one example — stands at 13 per cent, its lowest level since the early 1970s. Wheat and milled rice are also well below their  late 1990s ratios.

“The low stock environment has created a situation in which even small shortfalls in yields can have amplified effects on prices,” says the report, warning that harvest forecasts themselves depend on benign weather conditions.

Food importers — including Egypt —  had a nasty shock last summer, when Russia’s worst drought in over a century devastated the country’s crops, sending wheat prices rocketing 30 per cent.

Volatility in the prices of key commodities like sugar, rice, and petroleum products could also have unexpected effects in the months ahead, the World Bank warned.

Continuing unrest in the Middle East and North Africa spurred steady climbs in crude oil prices — with the resultant effect on transportation costs — until early August when global economic worries began to stifle demand.

Meanwhile, concerns over Brazil’s lower than expected sugarcane yields caused world sugar prices to rise by 29 per cent between May and June. Taken together, sugar and vegetable oils account for roughly 50 per cent of the World Bank’s Food Price Index.

The report also notes wild fluctuations in domestic food prices, with the influence of  international prices dependent on multiple factors, from market integration to transport conditions and tax rates.

Annual price changes in maize in the 12 months up to June 2011 ranged from increases of 100 per cent or more in Kampala and Mogadishu, to reductions of 19 per cent in Port-au-Prince and Mexico City. Domestic prices of sorghum saw annual increases of up to 180 per cent in Somalia and reductions of 37 per cent in Khartoum during the last year.
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