Food Prices Surge, Again Head Toward Record and Dangerous Levels
The current sugar cane crops in Brazil are falling far short of expectations, to the tune of some 50 million tons, and as a result shoppers could be facing near record high food prices… again. The latest findings come by way of the United Nations Food and Agriculture Organization (FAO), which recently released its increased food price index.
According to the Guardian:
“The United Nations Food and Agriculture Organisation (FAO) food price index increased by 3 points to 234 points last month – a 39% increase on the year – as concerns about weak Brazilian sugar production sent sugar prices soaring by 14%, outweighing a decline in cereal costs. As analysts at Goldman Sachs predicted that commodity prices would continue rising into next year, the average food price is now only 1.6% below February’s record, when the FAO’s basket of 55 food commodities reached 238 points. Brazil is by far the biggest sugar producer in the world, accounting for more than half of world trade.
“In recent weeks poor weather has prompted analysts to reduce the amount of sugar they expect Brazil to harvest this year by 40m tonnes to 535m – the same as last year. Rising sugar prices will make a wide range of food and drinks more expensive, from soft drinks to pies, putting more pressure on UK consumers already hit by rising inflation and weak economic growth.
“Average food prices in the UK jumped by 4.9% in the year to May – a 23-month high – while last month, the FAO and OECD jointly predicted that food prices would soar by as much as 30% over the next 10 years. Angel Gurría, secretary general of the OECD, said at the time that this would have a “devastating” impact on the world’s poor that was likely to lead to political unrest and starvation…
“…Goldman Sachs said it expected further increases in a wide range of commodity prices this year and into 2012 – in food, as well as energy and metals – on the back of strong demand from Asia. Goldman called the top of the commodities market in the middle of April, before calling the bottom six weeks later – after a significant decline in prices. On Thursday, the group reiterated its buy recommendation on commodities, naming Brent crude oil, UK natural gas, copper, zinc and soybeans as being particularly attractive bets.”
Increases in the prices of basic foods like rice, wheat, and corn have largely been to blame for the social unrest seen in several nations over the past year, especially riots in Arab countries where households spend a disproportionately large share of their income on groceries. A return to record levels is unlikely to contribute — well, at least in a good way — to global stability. You can read more in the Guardian’s coverage of how food prices are once again heading toward record highs.