Food price rises stoke riot fears

Food prices have soared to lev-els last seen in the 2007-08 crisis after a big October rise, the UN’s Food and Agriculture Organisation said on Tuesday.

The increase will renew fears about a  repetition of the wave of food riots that rocked poor countries from Bangladesh to Haiti two years ago. Higher agricultural commodities costs will also hit consumers in richer countries, with food companies such as  McDonald’s and Kraft already announcing price rises for 2011.

“The situation has deteriorated rapidly,” said Abdolreza Abbassian, economist at the FAO in Rome, adding that prices were “getting closer to the levels of 2008”. The FAO said its price index, a basket of wheat, corn, rice, oilseeds, dairy products, sugar and meats, jumped last month to 197.1 points – up nearly 5 per cent from September and the highest level in more than two years.

The index has now surpassed the levels seen during the early stages of the 2007 food crisis, and it is only below the peak of the calamity between February and July of 2008. “Prospects for improvements are very limited,” said Mr Abbassian, echoing a view widely held among crop commodities traders.

Until recently, the FAO had predicted that food prices would fall soon, but now officials are concerned that high costs could continue well into next year or even rise further. Wheat planting in the breadbasket region of the Black Sea is well below expectations, prompting forecasts of another low crop in 2011.

Moscow said last week that Russia’s farmers were set to plant about 15.5m hectares of winter grain crops this year – down from an earlier forecast of 18m hectares. Russia has banned grain exports until mid-2011 while Ukraine has put quotas on wheat, corn and barley, limiting overseas sales. The rally in global food cost in October was led by sugar prices, which hit a 30-year high on Tuesday, and costlier corn, soyabeans and milk.

The FAO drew comfort from relatively stable prices for wheat and rice, the two more important cereals for global food security, which remain far below their all-time highs. Wheat and rice are the staple of 5bn people in Asia and Africa. Rice hit an all-time high of over $1,000 a tonne in mid-2008, but traded last week at $505. Wheat hit a record $12.5 a bushel in February 2008 and traded at $7 a bushel on Tuesday. –Javier Blas in London, Financial Times