Jan 6, 2011

This wave of FOOD INFLATION has only started growing. -- The FEAR is of riots, bombings, and friendly governments being overthrown by Radical Muslims.

A farmer throws fertilizer on a rice paddy field in Dong Xung village, outside Hanoi, April 19, 2010. REUTERS/Kham

A farmer throws fertilizer on a rice paddy field in Dong Xung village, outside Hanoi, April 19, 2010.

Credit: Reuters/Kham


(Reuters) - Record high food prices are moving to the top of policymaker agendas, driven by fears it could stoke inflation, protectionism and unrest and dent consumer demand in key emerging economies.

The United Nations' food agency (FAO) said on Wednesday that food prices hit a record high last month, above 2008 levels when riots broke out in countries as far afield as Egypt, Cameroon and Haiti.

In Asia, official data and analyst estimates both pointed to inflationary pressures. Chilli prices have increased fivefold in Thailand in the last year and Indonesia's president called for households to plant food in their own gardens.

President Susilo Yudhoyono Bambang told a cabinet meeting people should be "creative" in planting, with Trade Minister Mari Pangestu leading the way in planting at home.

"I have 200 chilli plants in flowerpots," Pangestu told a briefing on Thursday. "The agriculture ministry is informing farmers how to take care of the plant and also encouraging consumers to plant chilli in their own yards."

Surging food prices have often provoked unrest in urban areas of poor countries, where food makes up a high proportion of household purchases.

Analysts say African and Caribbean economies dependent on food exports could be particularly hard hit, helping stoke unrest and potentially pushing governments toward imposing export bans and expropriating foreign-owned farmland.

If Asian and other emerging consumers have to spend more of their income on food, other purchases will fall -- and that could be bad news for a global economy that has placed much of its hopes for recovery on consumption in developing economies.

World Bank President Robert Zoellick urged governments in a newspaper opinion column to avoid protectionist measures as food prices rose and called upon the Group of 20 leading economies to take steps to make sure the poor get adequate food supplies.

French President Nicolas Sarkozy has asked the World Bank to conduct urgent research on the impact of food prices ahead of G20 meetings later this year, a source familiar with the matter said.


Food price protests were seen a factor in the ousting of Indonesia's long-term autocrat Suharto in 1998, and anger over a farmland purchased by South Korean firm Daewoo at a time of rising prices was in part blamed for a 2009 coup in Madagascar.

India's food price inflation rose to a one-year high of more than 18 percent in the year to the end of December, data on Thursday showed. That, along with rising fuel prices, is the main reason analysts expect the central bank to raise rates this month.

The Indian government has used a range of measures for years to ensure stable food prices, but since last year has boosted the release of national stocks of grains and has pledged to continue duty-free imports of crude vegetable oils.

In China, several cities have implemented direct controls to limit food price increases and the central government has vowed to eliminate speculation in the country's commodities markets.

The cost of food rose 11.7 percent in the year to November, while non-food items were up just 1.9 percent. But, reflecting concerns that inflation is creeping beyond food to the wider economy, consumer goods prices and housing costs showed clear jumps.

Fu Bingtao, an economist with the Agricultural Bank of China in Beijing, said in a report the price of grains, the country's most important food, would rise in 2011 by 10 percent, adding to an 11.7 percent rise in 2010. (Look!!! China is predicting a 22% rise in food prices just between last year and this year. This is a conservative guess, the reality is that food inflation will be worse this year, pushing all of this is 30% of US EU and Brazilian corn being used to make ethanol, and hundred dollar a barrel oil as it takes a lot of to make fertilizers, and it takes a lot of oil to farm.)

"Speculative trading and hoarding of specific agricultural products may continue," he said.