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| Wheat futures on the Chicago Board of Trade 2002-2007 |
The surge in soft commodity prices from tight supply and strong demand is set to push global food prices higher in coming months.
Wheat traded on Wednesday on the Chicago Board of Trade, at an 11-year high of $6.71 a bushel while European milling wheat rose in Paris to €218.75 a tonne, the highest since the wheat futures contract was launched 1998. European milk prices have rose to €5,500 a tonne, an 86 per cent jump since January. Prices have risen four-fold in five years.
Corn, barley, soyabean, coffee and cocoa prices are well above their averages of the past five years. In addition meat and poultry prices are also on the rise.
The Financial Times reports that French company Danone, the world’s biggest manufacturer of fresh dairy products, began to raise prices last month to cope with the higher cost of milk and other raw materials. Nestle, Unilever and Cadbury Schweppes are among others to have lifted prices. Antoine Giscard d’Estaing, the French group’s chief financial officer, said then that consumers would probably see prices rise in the shops. Panic buying by some food-importing countries is now also underpinning prices, particularly on the cereals market, traders said.
The FT says that Middle East and North African countries, such as Morocco and Egypt, which are dependent on wheat imports, have rushed to boost their stockpiles.
Demand in surging Asia and tight supplies resulting from adverse weather in Australia, the Black Sea basin and Europe, are some of the main factors for the surging prices in recent times.
The demand of the nascent biofuel industry for cereal crops is also an important factor.
Biofuels will help fight hunger but will hurt poor in short-term
| Food Aid Convention |
| Country |
Metric Tonnes of food |
| Argentina |
35,000 |
| Australia |
250,000 |
| Canada |
420,000 |
| European Union |
1,320,000 |
| Japan |
300,000 |
| Norway |
30,000 |
| Switzerland |
40,000 |
| United States |
2,500,000 |
The growing global demand for biofuels in the US and the European Commission's plan to mandate that all petrol and diesel in the European Union must contain 10 percent biofuels could spell serious environmental and economic consequences.
"In the case of the developing countries where sugar cane and palm oil are efficient sources of biodiesel that means we're going to see enormous growth in the tropics and subtropics in both ethanol and biodiesel," Earth Policy Institute president Lester Brown recently said. "What this is going to lead to is very rapid deforestation if no one intervenes. It is leading to a lot of land clearing in the Amazon, Indonesia and Malaysia."
Every year, an estimated 800 million people around the globe go hungry. Tens of millions die from malnutrition.
The Food Aid Convention (FAC) obligates wealthy countries to provide food aid and the US is the biggest provider.
Europe and Japan pay cash to the United Nations World Food Program and other agencies, to help them buy food to feed the hungry.
Canada divides its aid between cash and food bought in the country and the United States has traditionally bought vast amounts of its own surplus production for use as food aid.
The price of corn has doubled in the past year and the tight market situation will be a challenge for food aid administrators.
Brazil is the largest producer of biofuels and in the New York Times last week, Antonio José Ferreira Simões, the director of the Department of Energy in Brazil's Ministry of Foreign Affairs, wrote that one of the most common myths is that biofuels will necessarily compete with food production. He says that the largest food producers are the developed countries that strongly subsidize their agriculture. In developing countries, with few exceptions, large scale food production does not occur: They simply cannot compete with rich countries' agricultural subsidies. It is more cost-effective to import products offered as food aid from developed countries, or sold at subsidized prices, than to produce locally.
Simões says that production of biofuels in developing countries would change this picture. Large extensions of unutilized arable land in the Southern Hemisphere would be employed for highly profitable biofuel-oriented crops, restructuring the agricultural sector. Millions of jobs would be generated, thus increasing income, exports and food purchasing power of the poorest. Furthermore, production of biofuels in the South would help avoid redirecting the use of food-producing land in the North for this purpose.
Simões writes that in Brazil, biofuels production has grown alongside with increasing food crops. It is lack of income that fuels hunger, not the use of biofuels. Experience has proven that Biofuels production generates income, increasing food consumption. The Brazilian ethanol industry generates one million direct jobs and up to six million indirect jobs. Biodiesel benefits 224,000 low-income families.
Another myth is that the production of biofuels threatens the Amazon rain forest. Simões says that it should be noted that between 2004 and 2006, a period of strong growth in the Brazilian biofuels production, the Amazon rain forest deforestation rate was reduced by 52 percent. Also, large sugar cane plantations are located at least 1,000 kilometers away from the Amazon region, where it is not possible to efficiently grow sugar cane, due to the high humidity, which prevents saccharose from forming.
Biofuels also could contribute to reduce carbon emissions through the use of degraded lands. In the case of Brazil, we use less than 10 percent of all arable land for sugar cane cultivation. There are, however, 150 million hectares of degraded pasture land that the Brazilian Government is working to recover. This land will receive a vegetal cover from sugar cane, thus contributing to reduce carbon emissions.
