Ministers urged to act on 'simmering' food prices
An index of staple food prices is stuck at levels that in the past led to riots and violence, an expert warns
High levels of food prices threaten to leave vulnerable people across Latin America hungry and fuel social unrest, a leading expert of the economics of food prices has warned.
An index of staple crops that are essential for food supply such as corn and wheat has been stuck at the level that has led to the outbreak of violence since 2007, according to Professor Yaneer Bar-Yam of the New England Complex Systems Institute (NECSI).
He blamed a combination of use of corn to produce ethanol and speculation by Western financial institutions for the elevated levels of food prices.
He urged policymakers at the IDB meetings to use the event to urge the US and other Western countries to take action before the problems worsened. His comments came as commodity analysts warned prices could rise further before strong harvests expected later this year acted to bring prices back down.
An index produced by the UN Food and Agriculture Organization showed prices have been unchanged between December and February at 210.
Abbassian Abdolreza, a senior economist at the FAO, said he expected prices would stay within the narrow 210 212point range.
It is interesting that the index has not fallen as many would have expected and it is possible we can carry on along this trend for some time, he told Emerging Markets.
Bar-Yam said NECSI identified 210 as the threshold between little social unrest and widespread violence. We are in a situation where we are at a simmer and thats clearly not good, he told Emerging Markets.
Any additional increase in food prices would be a trigger for a potential new and much larger round of violence.
Food prices surged in 2012 following the worst US drought for more than 50 years. This led to a spate of robberies and riots that were blamed in part of high food prices.
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Two people were killed in the Argentine city of Rosario in December as looters broke into supermarkets in several cities. The government deployed several hundred military police to the southern city Bariloche when dozens of looters stormed a supermarket.
There are signs of price spikes in individual countries, according to the FAO. In Nicaragua and Honduras, maize prices have risen 20% since last year thanks to high fuel and transport costs.
In some importing countries, prices of wheat flour increased markedly in February for the second consecutive month, due to a 20% drop in exports from Argentina, which is an important supplier. In both Brazil and Bolivia prices of wheat products rose in February and were well above their levels of a year earlier, the agency said.
Abdolreza said while he expected prices to stay at current levels, it was next to impossible to know what would happen in the second half of the year as so much depended on the harvests.
Brazil has forecast a record soybeans harvest due to unprecedented expansion in planting following the years disappointing drop, and also expects a record corn crop.
Abdolreza said strong harvests should ease prices but there was still a danger of a reoccurrence of drought conditions in the US. There are many uncertainties ahead. The second half of the year is anybodys guess and we will have to see what the results of the harvest are.
Bar Yam urged policymakers to use the IDB meetings as a platform to urge reform of both quotas on ethanol use and to outlaw speculation.
There is a large amount of suffering going on and unless we take it seriously and address it, both the ethical problem of having suffering going on and the socially destabilizing effects will be long-term problems.
Picture by Teemu Mäntynen
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