09.08.2012 |

FAO: Risk of New Food Crisis as Prices Soar

FAO Food Price Index
FAO Food Price Index: Prices on the rise (Graphic: FAO)

According to the Food Price Index, global food prices have increased by 6% from June to July. The index, published today by the Food and Agriculture Organisation (FAO), measures monthly price changes in a food basket consisting of commodities such as cereals, dairy products and oilseed. Food prices averaged 213 points in July. This is still below the two previous price peaks in June 2008 and February 2011 - 224 and 238 points respectively. However, prices are getting dangerously close to the level of the 2007/2008 food price crisis when soaring cereal prices sparked violent food riots and hunger. “There is a potential for a situation to develop like we had back in 2007/08”, FAO’s Senior Economist Abdolreza Abbassian told Reuters. He warned against pursuing inadequate policies and intervening in the market by restrictions: “If those policies get repeated, anything is possible.” Following three months of decline, the current rise in prices was mainly triggered by a jump in grain and sugar prices. The FAO Cereal Price Index reached 260 points in July – a rise of 17% compared to June – and was only 14 points below the record high of 274 points in April 2008. The surge was driven by a severe deterioration of maize crop prospects due to the ongoing drought in large parts of the US, which pushed up maize prices by 23% in July. Worsened production prospects in the Russia and a strong anticipated demand for wheat as animal feed due to scarce maize supplies saw international wheat quotations increase by 19%.

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