Food prices reach dangerous new heights

The new year has brought with it worldwide concerns for the rising price of food. Figures from the UN’s Food and Agriculture Organisation show that the prices of all their five key food types – meat, cereals, dairy, oils and fats, and sugar – have risen considerably on last year.

The UN’s food price index showed a 25 per cent increase in the price of food between December 2009 and December 2010. This means that, with the exception of 2008, food prices have risen consistently since 2002 resulting in them now being at their highest level ever. It also means that the price of food has risen at over ten times the rate of average wage inflation in Britain. Added to a rise in unemployment, this will result in food accounting for a much greater proportion of household spending, forcing families to tighten their belts further than planned.

Many environmental factors are to blame for a fall in the supply of food last year and subsequently a rise in food prices. Droughts in Russia and Ukraine in August saw them ban wheat exports while both droughts and floods seriously affected Australia’s production of wheat and sugar. However, economic factors unrelated to the environment are also putting pressure on the food supply; in 2008, India banned rice exports in an effort to ease price inflation.

To make matters worse, demand for food is also rising. The world’s population is obviously growing exponentially and is forecast to exceed seven billion before 2015 but the last few years have also seen the rise of the middle class in some of the world’s most populous countries, the BRIC countries (Brazil, Russia, India and China), putting greater demand on non-subsistence foods like meat. A growing meat market, combined with America’s increasing production of biofuel, have increased the pressure on the supply of grain as it struggles to meet its demand both as a food and as a raw material.

Finally, rising oil prices are increasing the cost of the production and transport of food as well as causing price inflation in many markets across the globe. On 12th January, Brent crude oil reached $98.80 per barrel. Recently the price of oil has been of concern to world leaders, forced up by the closure of two Norwegian oil fields and a leak in a pipeline in Alaska. Economists have warned that a global recovery could be severely hamstrung should oil prices rise to more than $100 per barrel.

The results of the rise in food prices are already being felt in many countries, most notably in countries that import a large proportion of their food, such as Bangladesh. In Tunis, the capital of Tunisia, the government has imposed a curfew on citizens following a series of nationwide riots that have been met with military force.


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