By Javier Blas
Wednesday, January 5, 2011; 10:25 PM
LONDON - The Food and Agricultural Organization said Wednesday that the world faces a "food price shock" after the agency's benchmark index of farm commodities prices shot up last month, exceeding the levels of the 2007-08 food crisis.
The warning from the U.N. body comes as inflation is becoming an increasing economic and political challenge in developing countries, including China and India, and is starting to emerge as a potential problem in developed nations.
Abdolreza Abbassian, a senior economist at the FAO in Rome, said that the increase was "alarming" but that the situation was not yet a crisis similar to 2007-08, when food riots affected more than 30 poor countries, including Haiti, Bangladesh and Egypt.
"The world faces a food price shock," he said, adding that a prolonged spike could lead to a food crisis.
The FAO said that its food price index - a basket tracking the wholesale cost of commodities such as wheat, corn, rice, vegetable oils, dairy products, sugar and meat - jumped to 214.7 points, exceeding the peak of 213.5 set in June 2008.
Abbassian said that agricultural commodities prices would probably rise further. "It will be foolish to assume this is the peak," he said.
But the FAO and food aid agencies noted the relatively stable prices for rice, one of the two most important agricultural commodities for global food security.
But the cost of wheat, the other critical staple, is rising quickly after poor harvests last year in Russia, Ukraine and elsewhere. Corn, meat and poultry prices are also increasing.
Agricultural officials and traders are worried that agricultural commodities prices could rise further as the weather phenomenon la Nina intensifies. The pattern usually brings dryness to key growing areas of the United States, Argentina and Brazil.
The Australian Bureau of Meteorology said that the current la Nina system would last at least three more months.
Neil Plummer, a climatologist for the bureau in Melbourne, said that the latest phenomenon looked set to be the most powerful since the mid-1970s, when droughts ravaged crops and pushed the world into the most extreme food crisis since World War II.
- Financial Times