| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy

RSS FEED


How to use our RSS feed

Follow Finfacts on Twitter

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax - Income/Corporate

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Content Management by interactivetools.com.

News : Global Economy Last Updated: Mar 7, 2011 - 7:14 AM


Global food prices rose for eighth straight month in February; Real food cost at lowest since Great Depression
By Michael Hennigan, Founder and Editor of Finfacts
Mar 4, 2011 - 4:53 AM

Email this article
 Printer friendly page

Global food prices rose for the eighth straight month in February, with prices of all commodity groups monitored rising again, except for sugar, the United Nations' Food and Agriculture Organization (FAO) said on Thursday. Meanwhile IMF economists say the real cost of food is at the lowest since Great Depression.

FAO expects a tightening of the global cereal supply and demand balance in 2010/11. In the face of a growing demand and a decline in world cereal production in 2010, global cereal stocks this year are expected to fall sharply because of a decline in inventories of wheat and coarse grains. International cereal prices have increased sharply with export prices of major grains up at least 70% from February last year.

"Unexpected oil price spikes could further exacerbate an already precarious situation in food markets," said David Hallam, director of FAO's Trade and Market Division.

"This adds even more uncertainty concerning the price outlook just as plantings for crops in some of the major growing regions are about to start," he added.

Food Price Index


The FAO Food Price Index averaged 236 points in February, up 2.2% from January, the highest record in real and nominal terms, since FAO started monitoring prices in 1990.

The Cereal Price Index, which includes prices of main food staples such as wheat, rice and maize, rose by 3.7% in February (254 points), the highest level since July 2008.

The FAO Dairy Price Index averaged 230 points in February, up 4% from January, but well below its peak in November 2007.

The FAO Oils/Fats Price Index rose marginally to 279 points in February, a level just below the peak recorded in June 2008.

The FAO Meat Price Index averaged 169 points in February, up 2% from January. By contrast, the FAO Sugar Price Index averaged 418 points in February, slightly below the previous month but still 16% higher than February 2010.

Cereal supply and demand

FAO expects winter crops in the northern hemisphere to be generally favourable and forecasts global wheat productionto increase by around 3% in 2011.This assumes a recovery in wheat production in major producing countries of the Commonwealth of Independent States. So far, conditions of winter crops in those countries are generally favourable.

The latest estimate for the world cereal production in 2010 is 8m tonnes more than was anticipated in December but still slightly below 2009. This month's upward revision reflects mostly higher estimates for production in Argentina, China and Ethiopia.

The forecast for world cereal utilization in 2010/11 has been revised up by 18m tonnes since December. The bulk of the revision reflects adjustments to the feed and industrial utilization of coarse grains. Larger use of maize for ethanol production in the United States and statistical adjustments to China's historical (since 2006/07) supply and demand balance for maize are the main reasons for the revision.

IMF

Thomas Helbling and Shaun Roache, economists, both in the International Monetary Fund's Research Department, say in the current issue of the Fund's Finance & Development magazine that the world grew accustomed to relatively low international food prices in the 1980s and the 1990s, when prices adjusted for inflation were below those recorded during the Great Depression. But since the turn of the century, food prices have been rising steadily - - except for declines during the global financial crisis in late 2008 and early 2009 - - and this suggests that these increases are a trend and don’t just reflect temporary factors.

The economists say the most important explanation for the trend increase in food prices is that consumers in emerging and developing economies are becoming richer and changing their diet as a result. In particular, consumers in these economies are eating more high-protein foods such as meat, dairy products, edible oils, fruits and vegetables, and seafood. These products are more “income elastic” than staple grains. In other words, as people get richer, they demand more of these high-protein foods, whereas their consumption of grains may grow more slowly or even decline.

High oil prices and policy support have boosted demand for biofuels, which are used as supplements in transportation fuels, particularly in the advanced economies and also in some emerging economies, including Brazil.

While farmers have responded to the opportunities from rising demand, their response has only been gradual.

In other words, Helbling and Roache  say average prices have to increase to provide the incentives for increased supply. The interplay between productivity and acreage growth is key to understanding the supply response. Traditionally, rapid productivity growth in agriculture helped drive down food prices. But over the past decade, global productivity growth --  as measured by the amount of crop produced per hectare - - has fallen for rice and wheat compared with the 1980s and 1990s and has been broadly stagnant for corn and soybeans.

Less productivity growth means higher prices, everything else being equal.

With lower yield growth, production increases have had to be achieved by using more land. But increasing the amount of land devoted to producing more of a crop comes at a cost, which is reflected in higher prices.

Related Articles
403 Forbidden

Forbidden

Execute access is denied.


© Copyright 2011 by Finfacts.com

Top of Page

Global Economy
Latest Headlines
Bad week for Russia; More sanctions and $50bn Yukos bill
French economist hails progress against tax evasion; Swiss banks will continue to cheat
IMF says global recovery continues but it cuts 2014 forecast
Dublin's Grafton Street 23rd most expensive country ranking retail location in world
Governments have collected €37bn from personal tax haven evaders since 2009
Global investors’ love affair with Europe is in question…
Island states dominate global e-trade; Australia, UK & Japan in top 5 of G20 countries
Greasing the wheels of energy and food supply
Composite leading indicators continue to point to stable growth momentum in OECD area
IMF's Lagarde says global "recovery remains modest and fragile"
Global markets euphoria not reflection of economic reality; Warns on ultra-low rates
IMF: Developing economies are victims of corporate tax avoidance
FDI: Ireland not among prospective host sites of top global companies
Global Manufacturing: UK lowest cost location in western Europe; Brazil one of highest-cost countries
Global investors have regained an appetite for risk says survey
Banks no longer seek ‘Swiss solution’
Great Recession impact on potential growth as if German economy vapourised
Global Fraud Survey: Cybercrime a concern for Irish business executives
World Bank cuts global economic growth forecast after ‘bumpy’ 2014 start
Composite leading indicators suggest weakening in most major emerging economies; Stable in OECD area
Emerging markets remain stuck in low gear in May
US heads 2014 FDI Confidence Index; 11 European countries among top 25
Global manufacturing activity improved slightly in May; Pace below Q1 2014
Merchandise trade declines across most major economies in first quarter of 2014
Global travel city survey puts Tokyo on top, Beijing among laggards
Competitiveness 2014: US leads; Europe recovers and big emerging markets struggle
US companies take top 10 positions in global brand ranking
Singapore world's most business-friendly location; Followed by Switzerland & Hong Kong
Germany stands out among countries where immigration rose in 2012
Global growth fears rise as wages stagnate in Eurozone and elsewhere
Fund managers scale back risk-taking in May; German economic sentiment slides
Corporate Tax Avoidance: US may join China in alliance on sharing information
Emerging market output growth remains weak in April
Switzerland: The trouble with travellers
Switzerland, Singapore join OECD agreement to end bank secrecy for tax evasion
OECD urges European Central Bank to cut interest rates
Handful of European tax havens key to pressuring Russia on Ukraine
Too old to work, too young to retire
Swiss Pay 2002-2012: Top 10% get more than double rise of lowest 10%
The changing face of global banana trade