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Uncertainty fuels food price spike

United Nations, Feb. 4: Global food prices are moving ever higher, hitting record levels last month as a jittery market reacted to unpredictable weather and tight supplies, according to a UN report released yesterday.

It was the seventh month in a row of food price increases, according to the UN Food and Agriculture Organisation, which put out the report. And with some basic food stocks low, prices will probably continue reaching new heights, at least until the results of the harvest next summer are known, analysts said.

“Uncertainty itself is a new factor in the market that pushes up prices and will not push them down,” said Abdolreza Abbassian, an economist and the grain expert at FAO. “People don’t trust anyone to tell them about the harvest and the weather.”

Scattered bright spots in the report led experts to suggest that a repeat of the 2008 food riots stemming from similar sharp price increases might not be imminent. Rice was slightly cheaper and meat prices stable, they noted. But the overall uncertainty and inflation could eventually make the situation worse than three years ago, they said.

Riots and demonstrations erupting across West Asia are not directly inspired by rising food prices alone, experts noted, but that is one factor fuelling the anger directed toward governments in the region. Egypt was among more than a dozen countries that experienced food riots in 2008.

The FAO price index, which tracks 55 food commodities for export, rose 3.4 per cent in January, hitting its highest level since tracking began in 1990, the report said. Countries not dependent on food imports are less affected by global volatility. Still, food prices are expected to rise 2 per cent to 3 per cent in the US.

Four main factors are seen as driving prices higher: weather, higher demand, smaller yields and crops diverted to biofuels. Volatile weather patterns often attributed to climate change are wreaking havoc with some harvests. Heavy rains in Australia damaged wheat to the extent that much of its usually high-quality crop has been downgraded to feed.

This has pushed the demand and prices for American wheat much higher, with the best grades selling at 100 per cent more than they were a year ago, Abbassian said. The autumn soybean harvest in the US was poor, so strong demand means stocks are at their lowest level in 50 years, he said.

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