Rising food prices return to market focus

Food prices are continuing to rise, with corn posting its biggest one-day jump in three decades, leading experts to worry that this year’s volatile food prices could lead to widespread shortages.

US corn prices rose by 8.5% one day last week – the largest jump since 1973. It left prices 15% higher in just two days.

Wheat and other basic agricultural products have also soared – threatening a global food crisis like that of 2007 and 2008 sparked by droughts, rising fuel prices and subsidies for biofuel.The falling dollar has led to speculation in the commodities markets, pushing up prices and increasing volatility. But Andrey Sizov, Executive Director of Sovecon says the situation is still far removed from the concerns at the peak of the food crisis.

“Prices have jumped but they are still lower than they used to be during the food crisis, and though the grain reserves are lower than they were a year ago, they are much higher than they used to be back then. So the situation should not be compared with the one we had. There is enough grain for the world, even though the prices have grown rapidly.”

This latest food crisis was caused by crop failures in Canada, parts of Europe, and Russia, where drought devastated the wheat crop. By the end of summer the Russian government banned grain exports which contributed to a major jump in world wheat prices. It was said the ban might be lifted after the release of this year’s harvest data. But the first complete figures were as bad as feared.

60.9 million tonnes of grain was harvested – a third less than in the same period last year. The Ministry of Agriculture says the cost of lost grain has reached 41.5 billion roubles. Leonid Zlochevsky, President of the Russian Grain Union says the ban is likely to be extended.

“We believe the ban on exports will be prolonged at least to the next season and I doubt it will be lifted this January. I think the international community should count on our grain only from the start of the next season.”

In global terms, the collapse in Russia’s wheat harvest is the main story. But for farmers and consumers, a far broader range of crops was hit, from potatoes to buckwheat – which has destabilized the retail sector. Amidst fears that governments could respond with controls on food exports, and rising nominal prices in the face of widespread currency devaluation efforts, produce shortages could yet trigger a renewed global food crisis.