Part 1:
Dramatically higher food prices in the last couple months could be the straw that broke the camels back in Egypt and elsewhere in the world, with many countries and authoritarian leaders hoarding food now as analysts say they are seeing signs of panic buying in commodities. They may be trying to hoard food to prevent unrest, but are pushing up prices.
Experts say bad weather, people in emerging countries like China and India eating more meat, and biofuels are all combining to push the price of commodities higher.
Roubini at Davos warned that high food prices could be leading to world unrest.
In December, international food prices broke an all-time high when they rose 25% for the year, led by rising costs for staples like rice, wheat, and maize, the United Nations reported.
The sharp rise in food prices, in particular, has become "a source of political instability," New York University economist Nouriel Roubini, told CNNMoney's Poppy Harlow, at the World Economic Forum in Davos, Switzerland this week.
Roubini, nicknamed "Dr. Doom" for his famously bearish predictions, said spiking energy and food prices pose one of the greatest global threats -- especially to emerging market economies.
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Where it's hitting: The pinch has been felt most in rapidly developing countries like China, India, and Russia, which still have large portions of their population living in poverty.
Food inflation in China was recently at 9.6%, while in India it surged a staggering 18%.
Countries that depend on imports and don't grow a lot of their own grains, like many Middle Eastern nations, are also feeling the pain from price pressures. The recent turmoil there, with outbreaks of riots and violent clashes with police and military forces, is partially related to surging food prices.
Roubini says what is happening in Tunesia and Egypt, and also Morocco, is the result of increasing food prices and wealth disparity. Food prices have risen 18% in Egypt recently.
Food prices are expected to rise by February everywhere including the US. Pasta and bread are expected to rise sharply according to Eric La Flèche, president and chief executive officer of Metro Inc. Starbucks and General Mills have also announced price increases.
Grains, oilseeds and sugar are all higher, in some cases near levels last seen during the food crises in 2008, according to the Food and Agriculture Organization of the United Nations.
The basket of food basics reached nearly 215 points last month, up 25 per cent since a year ago, as demand rose in China while Russia’s grain crop suffered its worst drought in half a century.
In comparison, in India, food accounts for nearly half (47 per cent) the overall consumer price index. In China, it’s more than a third (34 per cent.)
“As consumers, we haven’t really seen it yet,” said Kevin Grier, an analyst with the George Morris Centre, a food policy think tank, in Guelph.
The chairman of Nestle, the world’s largest food group, warned this week that higher food prices could become permanent.
Saying the financial crisis of 2008 provided a brief respite, Peter Brabeck said one of the long-term problems is growing competition for agriculture land from biofuels.
The wholesale price of corn is now $6.60 U.S. a bushel, after trading between $3.50 and $4 for most of last year.
http://www.thestar.com/...