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Food prices set to surge 50 per cent within five years
James Kirby, The Age
HOW much do you think a litre of milk costs? A dollar? Two dollars maybe? Actually it’s $2.30 and it’s going up so fast the guy in the coffee shop below my office on Flinders Lane has put up a big sign explaining the new prices.
The price of milk has risen 20 per cent in the past year, says Bill Barbour, and he should know. He’s the investment manager at the DWS Global Agribusiness Fund, a $1.6 billion fund from Deutsche Bank that was formed last year to capitalise on what he calls “Ag-flation” – the sudden and irreversible upward momentum in food prices which is going to change the world as we know it.
Australian milk and dairy prices are bounding ahead and wheat prices are at an all-time high.
In China pork prices are up 90 per cent, in Britain food prices are growing at their fastest in a decade, in Mexico a sudden lift in the cost of flour for tortillas caused a riot a few months ago.
I had barely digested this news about food price inflation when two of the biggest food companies on the stock exchange reported annual results. At Goodman Fielder, CEO Peter Margin talked of a “perfect storm” of higher wheat and oil prices; at Futuris – owners of Elders Rural – CEO Les Wozniczka suggested food prices could rise by 50 per cent in the next five years.
What is driving food prices higher? A bunch of factors has combined at the same time. In Australia there is drought, which reduces supply against unchanged demand. ANZ’s chief economist Saul Eslake points out that the effect of the drought is only temporary: longer term falling EU subsidies will be a bigger driver of higher milk prices.
But a more important global force is climate change – or at least developments around climate change, such as the new limitations on land use and the push (especially in the US) to replace petrol with biofuel.
In the US biofuel quotas from the Bush Administration are prompting a big increase in the price of corn. In the same way our higher milk prices push up butter and cheese prices, higher US corn prices push up the price of beef.
But the biggest driver behind rising food prices is widening appetites in China and India, where more than 2 billion people who once got by on a largely vegetarian diet are aspiring to diets like you, me or Homer Simpson.
(2 September 2007)
Britons hungrier than ever for organic fare, but rising prices leave bitter taste
John Vidal, The Guardian
The organic food revolution is still gathering pace but could be knocked sideways next year by higher prices and difficulties finding enough produce in Britain, the fledgling industry warned yesterday.
New figures show Britons spent £1.9bn on organic food, drink and textiles in 2006 – 22% more than in 2005, but still less than 1.6% of all UK food sales. The market for produce grown without synthetic chemicals is now the third largest in Europe after Germany and Italy and has increased 27% a year on average for more than 10 years.
But the price of cereals has risen steeply with US farmers now diverting millions of hectares of land to grow biofuel crops and more animal food going to rapidly developing countries such as China and India.
Helen Browning, Soil Association director of food and farming, said that was now feeding through into the shops and would have an impact on many organic foods including meat, eggs, cornflakes and muesli, as well as baby foods and beer.
“Prices will have to rise. There has been a substantial rise in the price of grain, soya and maize. It’s leading to a shortage of organic cereals. Farmers are finding it harder to find the food for livestock. I am very nervous for [organic] pig and poultry farmers.” said Ms Browning.
(1 September 2007)
Yemeni price protests turn violent
Agencies, Al Jazeera
At least one person has been killed and nine wounded in clashes between Yemeni police and demonstrators protesting against rising prices in the capital, Sanaa.
Yemen has banned protests organised without permission after opposition parties staged several protests in recent weeks to demand the government acts to curb rising prices.
…Government officials say the rise is due to a sharp increase in the prices of commodities such as wheat in global markets.
The government has ordered state bodies to import goods and provide them at lower prices.
…Four out of 10 Yemenis live on less than $2 a day, according to Britain’s department for international development, which says Yemen’s oil, its main earnings source, is expected to dry up by 2015.
(2 September 2007)
