November 18, 2010
The United Nations (UN) warned yesterday that food prices could rise by 10%-20% next year
after poor harvests and an expected rundown of global reserves. More than 70
African and Asian countries will be the worst hit, said the Food and
Agricultural Organization (FAO) in its monthly report.
In its gloomiest forecast since the 2007/08 food crisis, which saw food
riots in more than 25 countries and 100 million extra hungry people, the
report's authors urged states to prepare for hardship.
"Countries must remain vigilant against supply shocks," the report warned.
"Consumers may have little choice but to pay higher prices for their food.
The size of next year's harvest becomes increasingly critical. For stocks to
be replenished and prices to return to more normal levels, large production
expansions are needed in 2011."
Prices of wheat, maize and many other foods traded internationally have
risen by up to 40% in just a few months
Sugar, butter and cassava prices
are at 30-year highs, and meat and fish are both significantly more
expensive than last year.
Thanks to volatile commodity price, prices for coffee, wheat, flour and
sugar have been rising in recent months, and are expected to continue rising
World coffee prices are at a 13-year high, according to Scotiabank.
Wheat prices were up 29% year-over-year in October
Prices are up “tremendously” because of weak wheat crops in Canada and
Russia as well as Russia’s export ban that will last well into next year,
said Scotiabank commodity expert Patricia Mohr.
To help cushion the impending blow, Tim Hortons - Canada's largest
restaurant chain - has bought up enough wheat, flour and coffee to make it
through the first half of 2011 and enough sugar for the entire year, said
Chief Executive Don Schroeder.
Food price inflation - fuelled by price speculation, the searing heat-wave in
Russia in the summer and heavy trading on futures markets - is now running
at up to 15% a year in some countries. According to the UN, international
food import bills could pass the $1tn mark, with prices in most commodities
up sharply from 2009.
Extreme volatility in the world markets has taken the UN by surprise and
forced it to reassess its forecasts for next year.
"Rarely have markets
exhibited this level of uncertainty and sudden turns in such a brief period
of time. World cereal production this year, which is currently put at 2,216m tonnes, is 2% below 2009 levels, 63m tonnes less than the forecast reported
in June," said the authors.
"Contrary to earlier predictions, world cereal production is now forecast to
contract by 2% rather than to expand by 1.2%, as anticipated in June," they
Global food reserves, which currently stand at around 74 days, are now
expected to decrease significantly in the next few months.
may drop by around 7%, barley nearly 35%, maize 12% and wheat 10%. Only rice
reserves are expected to increase, by 6% next year," said the report.
Much now hangs on next year's harvests, it said.
"International prices could
rise even more if production next year does not increase significantly - especially in maize, soybean and wheat. Even the price of rice, the supply
of which is more adequate than other cereals, may be affected if prices of
other major food crops continue climbing."
But food analysts said the prospects for a bumper world harvest next year
"2011 will not be a good harvest. The condition of winter wheat
crops is not good. Neither the US nor Russia are expecting good harvests,"
said Lester Brown, founder of the Washington-based
"The poorest will suffer the most because they feel the effect of price
rises directly. In the US and Europe, wheat may only make up 10% of the
price of a loaf of bread."