|Wheat futures on the Chicago Board of Trade |
Developing countries risk serious social unrest triggered by rising food prices the United Nations’ top agriculture official has warned.
Jacques Diouf, Director-General of the UN’s Food and Agriculture Organisation, says that surging prices for basic food imports such as wheat, corn and milk has the “potential for social tension, leading to social reactions and eventually even political problems”.
Diouf told the Financial Times that food prices would continue to increase because of a mix of strong demand from developing countries; a rising global population, more frequent floods and droughts caused by climate change; and the biofuel industry’s appetite for grains.
“That combination of factors would most likely lead to increases in food prices,” Diouf told the Financial Times in an interview.
According to Diouf, food represents about 10-20 per cent of consumer spending in industrialised countries, but up to 65 per cent in developing nations.
In the US, biofuel, which is subsidised, accounts for about one-fifth of the corn crop. The lack of acreage for other crops, such as soyabeans, pushes their prices up too. Last summer, the US Department of Agriculture reported that farmers planted 19 per cent more land with corn this year than last, while soyabean acreage fell by 15 per cent.
The futures price of wheat hit a record high of $8.86 per bushel on the Chicago Board of Trade on Wednesday. That's more than double the September 2006 price of $4.22 a bushel, said Mary Haffenberg, a CBOT spokeswoman. The price of wheat for December delivery fell Thursday to $8.24 a bushel.
The price is up by 60 percent this year.
In recent years institutional investors- from hedge funds to pension funds - are investing in agricultural commodities. Last year nearly $3 trillion in grain futures was traded on the Chicago Board of Trade (now part of CME Group), the world's largest such market.
Wheat prices have set record highs 16 times since June 27th and developing countries such as India and Egpyt are scrambling to beef up their reserves.
Wheat has been estimated to make up about 5 percent of the value of a loaf of bread in the US, Jay O'Neil, senior agricultural economist at Kansas State University's International Grains Program, told the Chicago Tribune.
The Tribune quotes a US baker today as saying that the base price for a hundred pounds of flour has increased from $15.50 in January to $19.60 this month, a 26 percent increase.
Radio New Zealand reported today that the Prices and Incomes Board in Fiji says the price of flour will rise by three cents per kilogramme today as a result of the global wheat shortage.
Colorado farmers are experiencing the largest wheat harvest in nearly 10 years – double last year’s harvest with more than 87 million bushels harvested. But many of the trucking and rail carriers formerly serving these agricultural markets have gone out of business in recent years due to the drought, low commodity prices, and high fuel prices.
Colorado governor declared a disaster emergency and temporarily suspended certain motor carrier registration requirements because a shortage of commercial vehicles is jeopardizing farmers’ ability to move harvested wheat off the ground and into storage facilities.