LENEXA, KANSAS - World food prices are on the rise, and the United Nation's Food and Agriculture Organization's (FAO) Food Price Index reached an all-time high in January. The FAO Food Price Index (FFPI), which measures the cost of a basket of basic food supplies - sugar, cereals, dairy, oils and fats and meat – across the globe, rose by 3.4 percent last month. It was the seventh consecutive monthly increase, and put the FFPI at its highest level since records began in 1990.

Crude oil prices are also on the rise, climbing above $100 this week as the civil unrest in Egypt and the Middle East raises concern over supply disruptions.

The FAO Food Price Index was 231 for January, and prices of all the commodity groups monitored registered strong gains last month, except for meat, which remained unchanged. FAO economist Abdolreza Abbassian said high prices were likely to persist in the month to come. He says rising commodity prices are one of the major factors behind a growing wave of civil unrest across the Middle East and North Africa.

“High food prices are of major concern especially for low-income food deficit countries that may face problems financing food imports, and for poor households which spend a large share of their income on food,” Abbassian says.

This week World Bank President Robert Zoellick told Reuters the world faces a broader trend of increasing food and commodity prices. Zoellick called on G20 leaders to "put food first" to tackle the surge in prices and increased volatility threatening the poor and driving up inflation in developing countries, mainly in Asia.

"We are going to be facing a broader trend of increasing commodity prices, including food commodity prices," Zoellick told Reuters.

"This can put pressure but also create opportunities," he added, noting that developing nations could boost revenues by increasing food production to meet rising global demand.
He said increased consumer demand, especially for sugar and meat, in fast-growing emerging economies was a major factor pushing prices higher compared with the 2007/2008 crisis.

A mix of high oil and fuel prices, growing use of biofuels, bad weather and soaring futures markets pushed prices to record levels in 2007 and 2008, sparking violent protests in Africa.

The International Energy Agency told Congress this week that oil prices are rising due to stronger demand from rebounding economies and concern over civil unrest in Arab countries. IEA Deputy Executive Director Richard Jones told the Senate Energy and Natural Resources Committee at a hearing on the oil market that claims speculators were behind the 25 percent rise in the oil price since September are not valid.

"Data on supply-and-demand fundamentals for the fourth quarter of 2010 that has recently become available points more towards a market tightening due to stronger-than-expected demand in key consumers and a concurrent drawdown of commercial oil stocks," Jones said.

"Reasons for this growth in demand include unseasonal weather patterns and better-than-expected global economic growth," he said.

Senator Ron Wyden of Oregon said he disagreed with IEA's narrow assessment of the cause of the rise in oil prices.

"I'm just concerned your approach gives short shrift to the possibility of speculation in the financial markets," Wyden told Jones at the Senate hearing.

He said a variety of factors affect prices and Congress should be looking at the speculative component of energy prices.

Jones said oil prices have shot up over the last week in particular because of concerns that protests in Egypt may lead to a disruption of oil shipments through the Suez Canal and that unrest may spread to other oil-producing countries in the region.

SOURCE: Drovers/Cattlenetwork