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Food prices near record levels



Published May 8, 2011


World food prices advanced to near record highs in April as grain costs advanced, adding pressure to inflation that is accelerating from Beijing to Brasilia, spurring central banks to raise interest rates.

An index of 55 commodities rose to 232 points from a revised 231 points in March, the UN’s Food and Agriculture Organisation (FAO) said in a report on Thursday.

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The gauge climbed to an all-time high of 237.2 points in February before dropping 2.6 percent in March.

The cost of living in the US increased at its fastest pace since December 2009 in the 12 months ended March, the same month in which Chinese consumer prices rose by the most since 2008.

The European Central Bank raised interest rates on April 7, joining China, India, Poland and Sweden in a bid to control inflation partly blamed on food costs.

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Costlier food contributed to riots across northern Africa and the Middle East that toppled leaders in Egypt and Tunisia this year.

“There seems to be some easing for a lot of commodities, but whether this is demand rationing, we have to wait and see,” said FAO senior economist Abdolreza Abbassian. “If the weather is good, if plantings expand, I think we could see some relief in food prices.”

Sugar prices slumped 18 percent in New York last month, while milk futures fell 1.8 percent in Chicago. US wholesale beef prices dropped 3.4 percent and pork declined 2.2 percent.

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Wheat prices rose 5 percent in Chicago after falling the previous two months, while maize jumped 9.1 percent.

Maize has almost doubled in the past year on speculation that more planting in the US would not be sufficient to rebuild global stocks.

Wheat surged 57 percent over the same period and soybeans gained 39 percent as flooding ruined crops in Canada and Australia and drought reduced harvests in Russia and Europe.

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World grain stocks will probably slide for a second year in the 12 months to June 2012 as maize consumption outpaces production and dry weather hurts wheat prospects in the US and the EU, the International Grains Council said in a report last month.

The FAO’s food price index fell for eight consecutive months after reaching its previous peak in June 2008, a situation that probably would not be repeated this year, Concepcion Calpe, an economist at the UN agency, said last month.

“Very strong” demand for food, feed and biofuel might mean prices would climb in coming months, she said.

The FAO forecasts that food output will have to climb by 70 percent from 2010 to 2050 as the world population swells to 9 billion and rising incomes boost meat and dairy consumption.

Producing 1kg of pork can take 3.5kg of feed, according to data from the US Department of Agriculture.

About 44 million people had been pushed into poverty since June by the “dangerous levels” of food prices, World Bank president Robert Zoellick said in February.

Another 10 million might join them should the UN food index rise another 10 percent, the World Bank said last month.

The number of hungry people globally declined last year to 925 million from more than 1 billion in 2009, according to the FAO. – Bloomberg

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