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FAO food price index hits record high

By Caroline Scott-Thomas , 05-Jan-2011

The Food and Agriculture Organization’s (FAO) food price index hit a record high in December, topping 2008’s previous high when soaring food costs led to food shortages and riots in many parts of the world.

The index, which measures the average price of a food commodity basket consisting of cereals, oils, dairy, meat, and sugar, was up for the sixth month in a row in December, to reach a high of 215 points, up from 206 points in November, and the highest since records began in 1990. At its June 2008 peak, the index was at 213.5 points.

FAO senior economist Abdolreza Abbassian told Reuters : “We are concerned, the real reason for concern is the unpredictability.”

However, some of the factors that led to unrest during the 2007-2008 food crisis are not present in the current situation, such as poor cereal crop production in poorer countries and a sharp increase in the price of oil.

“There is still room for prices to go up much higher, if for example the dry conditions in Argentina tend to become a drought, and if we start having problems with winterkill in the northern hemisphere for the wheat crops,” Abbassian said.

In addition to high overall food prices, the FAO’s sugar price index hit an all-time high of 398.4 points in December, up from 373.4 points in November. And its cereal price index, which includes wheat, rice and soybean prices, is at its highest level since August 2008, at 237.6 points.

In the United States, the US Department of Agriculture (USDA) has also predicted that food prices will rise during 2011, and in recent weeks several major food manufacturers announced their intention to raise prices on the back of stronger commodity costs.

The USDA said at the end of October that food price inflation – after dropping to its lowest rate in 18 years – will accelerate during the first half of 2011, leading to a forecast of two to three percent food price inflation during the year.

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