Poland’s agriculture ministry has just came up with a new forecast that food prices in 2008 would rise by 10-15 percent. Similar trends are observed globally, in some place trigerring social unrest. Take a look at the selection of most recent articles on this topic:
- The Economist article on food export restrictions. A quote:
” FROM a “band of bakers” protesting in Washington D.C. to rioters setting buildings alight in Ouagadougou, Burkina Faso, pressure has risen on governments around the world to bring down food prices. In the past two weeks Cambodia, Indonesia, Kazakhstan, Russia, Argentina, Ukraine and Thailand have taken the easy option, restricting food exports in an attempt to shore up domestic supplies”
“Export restrictions also exacerbate the rise of global food prices. Last month, when Kazakhstan threatened to limit wheat exports, some wheat prices soared by 25%. Joseph Glauber, chief economist at America’s Department of Agriculture, reckons that restraints on the export of wheat may have added as much as 20% to wholesale prices—though not as much at the retail level.
The more prices rise, the greater the incentive to hoard, which creates an upward price spiral. Across Asia, restrictions on the export of rice have helped increase its cost on world markets by about 75%. On March 26th Cambodia became the latest country to ban rice exports. Thailand, the world’s largest rice exporter, is also considering restrictions. Meanwhile, there is talk that importers, like China and Japan, are stockpiling rice to safeguard supplies.”
- Financial Times article on surging rise prices in Asia. A quote:
“Vietnam said it would reduce rice exports this year to 3.5m tons, from a projection of between 4m and 4.5m tons. India raised its minimum export price to $1,000 (€635, £500) per ton, up from $650 per ton, in a bid to keep domestic prices low.
In Thailand, the world’s largest exporter, millers were storing rice and defaulting on contracts with exporters. “Exporters who have stock are making a lot of money, as millers who have supply contracts are not actually delivering the rice,” said Vichai Sriprasert, president of Riceland International, a Thai rice exporter. “I believe the losses are running by about $200 per ton for those who don’t have physical control of the rice.”
The moves follow measures by Egypt and Cambodia to ban rice exports, which prompted world prices to hit an all-time high on Thursday. Global rice stocks are at their lowest since 1976.”
- FT article on one-day rice price jump by 30%, after imposing an export bank by Egypt.
- The Economist article linking rise prices to bad policies.
Bad news keep coming. FAO estimates are optimistic about global grain crops in 2008, so it should help rebuild inventories which are at lowest level for many decades. The last thing we need this year is bad weather and climate disasters. Medium term eather forecasts are not reliable, however. You can get a five-day forecast, or a fifty year forecast (although there are two views, one is global warming and another one is global icing, thanks to low sun spots activity).
It is hard to be optimistic about the weather, anyway. Whatever the trend, volatility of temperatures and frequency of climate disasters is on the rise. What we need over the next few years are much more developed markets for climate related products, to make us able to hedge the risks better.
- FT article on export bans and prospects for food prices to remain high until 2010. A quote:
“Saudi Arabia cut import taxes across a range of food products on Tuesday, slashing its wheat tariff from 25 per cent to zero and reducing tariffs on poultry, dairy produce and vegetable oils.
On Monday, India scrapped tariffs on edible oil and maize and banned exports of all rice except the high-value basmati variety, while Vietnam, the world’s third biggest rice exporter, said it would cut rice exports by 11 per cent this year.
The moves mark a rapid shift away from protecting farmers, who are generally the beneficiaries of food import tariffs, towards cushioning consumers from food shortages and rising prices.
But economists warned that such actions risked provoking an upward spiral in global food prices, which have already been pushed higher by rising demand from emerging markets like China and India and pressure on land from the growing production of bio-fuels.”