Fueled by soaring sugar prices and strength in cereals and oil seeds, a food price index developed by the UN Food and Agricultural Organization ( http://bit.ly/9M7Ha1 ) hit a new record in December -- and could go higher in 2011, Reuters reports.
In December, the index, which measures monthly price changes for cereals, oilseeds, dairy, meat, and sugar, averaged 215 -- up from 206 in November and topping the previous high of 213.5 in June 2008, when bad weather and market speculation pushed prices higher, sparking food riots in some countries.
FAO economist Abdolreza Abbassian told Reuters that the unpredictability of current weather activity is a concern for the immediate future, but he does not expect the level of turmoil
that occurred in 2008, when a variety of factors, including weak output in poor countries and a sudden surge in crude oil prices, triggered deadly riots in Cameroon, Egypt, and Haiti.
The price of wheat and other grains surged in 2010, buoyed in part by a series of weather events, including drought in Russia and its Black Sea neighbors. In Europe, wheat prices doubled, while the price of American corn rose more than 50 percent and the price of soybeans jumped 34 percent. The current low level of grain stocks means that additional weather-related damage to crops could drive prices even higher. At the same time, the price of oil has marched higher on a resurgence in global demand and speculation, further raising concerns about the burden of rising prices for food and energy, especially for developing countries that import large quantities of both.
"There is still room for prices to go up much higher," Abbassian told Reuters, "if, for example, the dry conditions in Argentina tend to become a drought and if we start having problems with
winterkill in the northern hemisphere for the wheat crops."
"U.N. Food Price Index Jumps in December." Reuters 1/05/11.