Food Price Index surpasses the spike in 2008

The FAO Food Price Index has surpassed the upper bound reached in 2008. Commodity-wise, price of sugar has been spiking since May 2009. Similarly, prices of cereals and oil & fats are also going up. Price of meat is stabilizing but still is higher than in December 2008. The price of dairy is reaching the level reached in December 2008. Here is an explanation of why we are not seeing riots and disruptions around the world as we saw in 2008: due to weak dollar as $ is used for world food prices, and people are used to higher food prices. Here is more on the FAO predicting the next food price shock.

Free markets and food security

WB president Robert Zoellick argues that free markets can still feed the world and reduce food market volatility. To enable vulnerable countries access to food, he proposes the following measures be adopted by the G20:

• Increase public access to information on the quality and quantity of grain stocks.
• Improve long-range weather forecasting and monitoring, especially in Africa.
• Deepen our understanding of the relationship between international prices and local prices in poor countries.
• Establish small regional humanitarian reserves in disaster-prone, infrastructure-poor areas.
• Agree on a code of conduct to exempt humanitarian food aid from export bans.
• Ensure effective social safety nets.
• Give countries access to fast-disbursing support as an alternative to export bans or price fixing.
• Develop a robust menu of other risk management products.
• Help smallholder farmers become a bigger part of the solution to food security.

One comment: Easier said than done!