Strain on the dinner plate

Just as the economies of the world have been battling with budget deficit problems, currency wars and default risks, a crisis seems to be brewing in their very own dinner plates.
The FAO Food Price Index released last week recorded the highest index of food prices in December 2010, breaking the earlier record hit in June 2008.
The hike in food prices has also been driving political agendas; the French President has taken the issue to the G20 platform, pressing for more coordination to tackle the looming crisis. In the meanwhile, riots have broken out in Algeria in protest of the rising prices, while a similar uprising was witnessed in Mozambique in September 2010.
Previously, it was being said that a food crisis similar to the one experienced in 2008 would not be witnessed because the oil prices weren at the levels seen in 2008. However, with oil prices hovering near $90 per barrel, and expectations of the commodity crossing the $100 mark in the near future, grounds for a food crisis seem more firm.
"Current high oil prices make agrofuels more profitable and are therefore pushing more food crops into the ethanol and biodiesel plants," Frederic Mousseau, policy director of the San Francisco- based Oakland Institute told a foreign news agency.
Climatic factors have also played their part in spurring up food commodity prices. It began with the wild fires in Russia, and was soon followed by floods in Pakistan, India, and dry weather conditions in Brazil and Argentina. Weather conditions in these areas had affected wheat, grains and sugar crops considerably.
As if that wasn enough of natural catastrophes, floods have hit Australia again, affecting an area greater than the size of France and Germany combined. Being the worlds fourth-largest exporter of wheat, damage to Australias wheat crop has sent global wheat prices to a 29-month high.
Australia has also slashed its sugar export forecast by 25 percent for the year, with exporters from the area actually buying raw sugar from Brazil and Thailand to meet their export orders.
Where Australia is struggling with an excess of water on its fields, dry weather conditions in Argentina and Brazil have just added to the woes as corn and soybean prices climbed due to concerns about weather conditions in the countries. Together, the two countries account for 45 percent and 26 percent of soybean and corn exports respectively.
The direct effect of a shortage in supply is not the only phenomenon driving up the prices of food commodities, as news of rising oil prices or a climatic setback in one country circulates, speculative buying in commodity markets also jack up prices.
Then the contagion effect of food prices is also quite significant. Prices of corn and grain increase, meat prices are expected to increase as corn and grain are major constituents of livestock and poultry feed. The only respite for now can be found in the relatively stable prices of rice, an important staple food item.
Increasing consumption in countries such as China and India, and a growing world population mean the pressure on food prices is not likely to get a breather for a considerable length of time. This calls for more focused attention on the food issue as it will have a far-reaching influence on future political and economic decisions.