Wednesday, April 25, 2012

Global food prices are rising again according to the World Bank

Global food prices increased by 8 percent from December 2011 to March 2012 due to higher oil prices, adverse weather conditions, and Asia’s strong demand for food imports, according to the World Bank Group’s latest Food Price Watch.

The World Bank’s Global Food Price Index was only 1 percent below a year ago and 6 percent below the February 2011 historic peak. If the current forecasts for increased food production do not materialize, global food prices could reach higher levels, underscoring the need to remain very vigilant. 

“After four months of consecutive price declines, food prices are on the rise again threatening the food security of millions of people,” said Otaviano Canuto, World Bank Vice President for Poverty Reduction and Economic Management (PREM). “Putting food first must remain a priority for the international community and in our work in developing countries.”

According to the quarterly Food Price Watch report, prices of all key staples increased between last December and March of this year, except for rice, due to both abundant supply and strong competition among exporters. Maize prices increased by 9 percent, soybean oil by 7 percent, wheat by 6 percent, and sugar by 5 percent. Crude oil prices rose by 13 percent.

In addition, domestic food prices remain high, especially in Africa as the result of a combination of large food imports and local factors, such as trade restrictions between neighbors, hoarding, civil unrest, high fuel transportation costs and bad weather conditions.

In a global context, domestic food price increases have been larger than price declines across countries.  Wheat prices from March 2011 to March 2012 rose 92 percent in Belarus, while the price of maize increased by 82 percent in Malawi, 80 percent in Ethiopia, and 71 percent in Mexico.

Production outlooks remain strong for 2012/13 and a number of factors have kept pressures on prices at bay. Record prices in late 2010 and early 2011 led to increased production of major crops worldwide, and are a key factor in the strong projections for the 2012/13 season. The slowdown in maize use for ethanol production in the U.S. and weak global demand due to the euro crisis are contributing to keeping upward price pressures on check.