FAO fears record food prices could head even higher

City A.M. Reporter
WORLD food prices hit a record high last month, outstripping levels that prompted riots in 2008, and key grains could climb even further, the UN's food agency has warned.

The UN Food and Agriculture Organisation's measure of global monthly price changes for a food basket of cereals, oilseeds, dairy, meat and sugar has reached its highest since records began in 1990 – topping levels in 2008 when a food crisis sparked riots in some countries.

A mix of high oil and fuel prices, growing use of biofuels, bad weather and soaring futures markets pushed up prices of food in 2007/08, sparking violent protests in countries including Egypt, Cameroon and Haiti.

FAO economist Abdolreza Abbassian told Reuters the organisation was worried by the unpredictability of current weather activity, given the already high price levels and low supply of some grains.

"There is still room for prices to go up much higher, if for example the dry conditions in Argentina tend to become a drought, and if we start having problems with winterkill in the northern hemisphere for the wheat crops," he said.

Winterkill occurs when cold attacks plants seeded, generally in the autumn, for harvesting the following year.

Prices of grains surged in 2010, with wheat buoyed by a series of weather events including drought in Russia and its Black Sea neighbours. European wheat prices doubled, US corn rose more than 50 per cent while US soybeans jumped 34 per cent.

"The fundamentals of the corn market are clearly the tightest ones," said Societe Generale analyst Emmanuel Jayet. "It's the grain where stocks are already very low and where there are questions about a further drop to historically low levels," he said, adding that he also expected soybeans and wheat prices could rise on a fall in supplies.

The FAO's food price index put in its sixth straight rise, averaging 215 points last month, up from 206 points in November and topping the high of 213.5 reached in June 2008.

Its indexes for sugar and meat reached new record highs, while its Cereals Price Index, which includes prices of main food staples such as wheat, rice and corn, rose to its highest level since August 2008.