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The dangerous dance of rising food and energy prices - March 4

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The Invisible Food Crisis

Annie Lowrey, Slate
The next time you are in your local grocery store, look for signs of dramatic inflation. You won't find any. In all likelihood, your bananas and breakfast cereal and milk are about the same price as they were a year ago. According to the Bureau of Labor Statistics, the price of a basket of common foods increased only about 1.5 percent in 2010, after declining 0.5 percent in 2009.

Perform the same exercise in an Egyptian or Bangladeshi market, and you would get a different picture. In the past few months, skyrocketing food prices have raised concern among economists and anti-hunger advocates—and rising food costs have even helped foment revolutions. This week, the World Bank reported that food prices increased 15 percent from October to January and have climbed 30 percent in the past year. Currently, the bank's price index sits just 3 percent below its 2008 record. The United Nations' Food and Agriculture Organization keeps a separate index of food costs—and it blew past the all-time record last month. Wheat prices have doubled since last summer. The price of corn has risen about 75 percent since June. Prices for sugar and cooking oils have also jumped. The consequences are potentially devastating. The World Bank says that spiraling food costs have driven 44 million people into extreme poverty since June 2010.

What is causing such a drastic spike? And will it ever reach America?...
(17 February 2011)
Hmmmh...if it reaches America, will it become 'visible'? And see here. -KS


Food prices reach record highs

Food Services of America warning to food service businesses
Food prices are increasing with predictions of more increases due to the uncertainty surrounding decreased production and increased consumption. World food costs are now 25% more than they were just a year ago. But this increase is on top of the 43% jump in food costs in June of 2008.

The prices of 55 food commodities tracked by the U.N.’s Food and Agriculture Organization have risen to record highs driving prices higher around the globe and sparking riots in Egypt, Haiti, Somalia, Cameroon, Tunisia and Mozambique.

This means in the last couple of years, food costs have skyrocketed with the potential for dramatic effects on your foodservice operation.

What’s behind the increases?

•   The worst drought in Russia in the last half century has wiped out so much of the country’s wheat crop that Russia has banned any exports of grain. 

•   At the other end of the weather extreme, massive floods in Australia’s fertile Queensland area has damaged the country’s crops of wheat, corn, sorghum and vegetables and fruit.

•   Freezing weather in the U.S. and Mexico has damaged produce production.

•   Increases in the price of oil have contributed because of the rising costs to harvest, transport and distribute food products.

•   The divergence of corn crops to produce ethanol reduces the amount of corn available for food and for feed, thereby increasing the price of corn which affects food costs and meat costs.

•   Rising consumption among fast-growing middle class segments in places like China and India is driving the demand up.

The bottom line is that there is a shortage of supply as the world’s demand is increasing – a sure-fire recipe for increasing costs.

Since food costs are one of your highest expenses, you must respond immediately to these historic increases or you will not be able to sustain your operation.
(February 2011)
Thanks to Jason Bradford for alerting us to this one and the one below. -KS


Climbing fuel prices trigger alarm

Wes Sander, Capital Press
Farmers and truckers are bracing for a spring growing season with diesel prices in the $4-per-gallon range.
Fears persist of higher prices in coming months, as global demand steadily expands, unrest builds in oil-producing nations and domestic policy favors renewable energy over oil drilling.

Manuel Cunha, president of Nisei Farmers League in California, said growers in the past few days have been telling him that fuel prices are their top immediate concern. The industry fears diesel could soon rise to $5 a gallon, he said.

"These prices are really going to cause havoc for the farm industry," Manuel said. "This is going to drive us even deeper into the recession."
This week the American Automobile Association put the national average diesel price at $3.74 a gallon, well above the $2.87 it cost a year ago. Gasoline was at $3.39, up from $2.70 a year ago.

AAA put Oregon's average on-road diesel price at $3.86 per gallon on the same day. The average was $3.91 in Washington, $3.82 in Idaho and $4.11 in California.

Some observers, including the conservative Heritage Foundation, argue that President Barack Obama's energy policy began boosting pump prices well before current Mideast tensions. That includes policies to limit production permitting for both land-based and offshore drilling.
(26 February 2011)



Caught in the Food Pirates’ Trap

Devinder Sharma, Ground Reality
The unexpected has happened. Rising food prices and high unemployment have triggered an unprecedented uprising in the Arab world. The fire that began from Tunisia had quickly spread across the desert sands. Egypt, Jordan, Yemen, Sudan and Algeria were faced with a political turmoil. (Egypt has already got rid of its autocrat of 30 years – Hosni Mubarak.)

Unlike the 2008 global food crisis, when 37 countries faced food riots, ousting the Haiti president in the process, spiralling fuel and food prices, especially since September 2010, have been more piercing this time resulting in a strong political tsunami. It all began when Russia, faced with extended drought and widespread wildfires, brought in an export ban till the next year’s wheat harvest, thereby propelling global prices to an unreasonable hike.

Deadly food riots were witnessed in September in Mozambique, killing at least seven people. According to news reports, anger was then building up in Pakistan, Egypt and Serbia over rising prices. In the first week of January, Algeria faced food riots. A few days later, Tunisia sounded the first bugle, ousting its president, and Egypt followed.

As early as in September, Financial Times had reported that wheat futures had taken advantage, and that wheat prices internationally had gone up by 70 percent since January 2010. This happened at a time when there was neither shortfall in production nor any appreciable rise in demand. Egypt, which imports nearly 50 percent of its food requirement, was hit badly when Russia decided to ban wheat exports. Many believe that the Switzerland-based food major Glencore actually forced the Russian government, which had enough wheat reserves, to impose a ban on exports thereby sparking a killing in the futures market.

The social and political unrest that has swept the Arab hinterland is a pointer to a grave crisis ahead. Although Dominique Strauss-Kahn, the head of the International Monetary Fund (IMF) agrees that the rising food and fuel prices in recent months are the major factors behind the massive anti-government protests, he suggests more of the same prescription: “As tensions between countries increase, we could see rising protectionism – of trade and of finance.”

Not drawing any lesson from the debacle of the dominant economic model of growth, business leaders from 17 private companies announced at the World Economic Forum at Davos in the last week of January the launch of a global initiative -- New Vision for Agriculture -- that sets ambitious targets for increasing food production by 20 percent, decreasing greenhouse gas emissions per ton by 20 percent, and reducing rural poverty by 20 percent every decade...
(26 February 2011)

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