Can the world be on the verge of a second food crisis? Nader Noureddin* studies current food prices An imminent food crisis is looming and the World Bank (WB) has warned against it in a recent publication titled, The Next Food Crisis -- Is it Coming? The report urges developing countries to increase their food production or be ready to face a new food crisis soon. This time round, the crisis will be due to different reasons than those of the last food crisis of 2007-2008, the years of the global economic slowdown. The Food and Agriculture Organisation's (FAO) food price index, which consists of the average of six group price indices including meat, dairy, cereals, oils, fats and sugar, considers the 2002-2004 average prices as a reference equal to 100. This index reached 191 during the peak of the food crisis in June 2008. Today, this value is even higher. Last October, for example, it hit an all-time record of 197, the highest in the past 10 years. Most of the price leaps took place during the four months prior to October 2010 reaching 160 in June, 167 in July, 177 in August, 189 in September and finally 197 in October, according to the FAO food price index as at November 2010. Similarly, the four meat group average price index recorded 128 during 2008 before it reached 138 in October 2010. More specifically, Brazilian poultry prices jumped from $1,552 per tonne in 2009 to $1,750 per tonne in October. Bovine meat showed similar trends as Australian bovine boneless meat recorded $3,138 per tonne freight on board (FOB) during 2008, dropped to $2,636 a tonne in 2009 but later it made a sharp rise to record $3,478 a tonne in October 2010. Sugar was no exception. The sugar price index (SPI), which was around 182 during 2008, hit 345 in October. The main reasons include drought in Brazil, the world's largest sugar producer and exporter, and flooding in the second exporter, India. As a result, sugar prices rose during 2010 by about 90 per cent compared to last year. It is worth noting that the price of sugar in the Egyptian retail market follows a pattern of its own. When the SPI hit 376 in January 2010, the price of a kilo of sugar jumped to LE5. However, when the SPI decreased to 345 in October 2010, the price rose further to hit LE6 per kilo in the local market. Similarly, when sugar prices went down in the international markets during February through May hitting 216 compared to 376 in January, local sugar prices did not go down. Instead, they settled at LE5 per kilo. Obviously, the retail market in Egypt needs to be better monitored and controlled. During 2010, most food groups tend to record high price levels similar to those of 2008 and which are much higher than those of 2009. The dairy price index, for example, which recorded 220 during 2008, decreased to 142 in 2009 before rising to 203 in October 2010. Averages for the nine main fine and coarse grain cereals recorded 238 in 2008, decreasing to 142 in 2009 and rising to 219 in October 2010. Drought in Russia, Ukraine, Kazakhstan and Canada in addition to the reduction in soft wheat planting areas in the United States by 30 per cent caused wheat prices to rise in the stock market. Oils and fats prices also increased during 2010. The price index of oils and fats which reached its maximum of 225 is once again approaching an all-time increase of 217 during 2010. As these figures represent the international trend in food prices, one must ask: what's next? The rise in food prices in Egypt is most detrimental to our economic and social stability. A major step forward would be to increase our food production, particularly with regards to the six main crops that are in major shortage in the country. These include wheat, maize, oilseeds crop, lentils and broad beans. A new agricultural policy targeting the plantation of strategic rather than marginal crops should be put in place. * The writer is professor of agriculture resources at the Faculty of Agriculture, Cairo University.
