Global Food Prices Skyrocket

According to a new World Bank report, the price of wheat more than doubled during the second half of 2010, nearing all-time highs. The prices of other grains steeply rose over the same period. A UN agency that tracks the price of food globally reported prices were at their highest levels since the creation of their index (1990).  That World Bank report suggests that 44 million people have been pushed into extreme poverty as a result of this latest increase in prices. Here’s a quick guide to the situation:

What are the causes of this spike in prices?

That depends who you ask. Experts have offered any number of explanations. Among those cited: increasing demand from China; catastrophic crop failures in countries like Russia, Pakistan, Australia, and Sri Lanka due to severe weather; shrinking stockpiles of grains (caused by decreasing government subsidies); increased demand for meat from the developing world, greater investment in biofuels, and drought.

What crops have been hit hardest?

Prices have gone up the most for corn, wheat, cooking oils and sugar during the last 6 months. The price of rice has also increased, but not as drastically.

What’s going to happen?

Depends who you ask. Some analysts predict that growing food prices could inflame tension in the Middle East, which has already seen dramatic protests in Tunisia and Egypt partially as a result of the price increases. The Business Insider offers a list of 25 countries whose political systems could be in trouble if prices remain high. Also ominous are the thoughts of Nouriel Roubini, the NYC economist who correctly predicted the financial crisis. He believes food prices could cause another global economic disaster and says, ”Surging food and energy costs are toking emerging-market inflation that?s serious enough to topple governments.” Other analysts don’t go so far, and simply predict another wave of hunger among the world’s poor.

How many people could go hungry?

As mentioned above, the World Bank believes 44 million people entered extreme poverty as a result of increased food prices. That sounds horrible, and it is, but we also need to keep some perspective. At any one time, one billion people are estimated to go hungry. Given that figure, 44 million doesn’t seem nearly as bad as it could be.

What will happen here in the United States?

Most people expect very little. Over the last year, food prices here have risen just 1.5 percent. People in the United States tend to spend just 10 percent of their disposable income on food, while people in developing countries may spend more than 50 percent of their total income on food. Simply put, since we don’t spend as much on food, we don’t notice the increases as acutely.

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