World Food Price Index Up 32 Percent – 2010

Corn suffering drought

U.N. reports that Food and Agriculture Organization’s index of world food prices rose 32 percent in the second half of 2010. Low rainfall in Russia, Kazakhstan, Europe, and South America parched crops. Heavy rains and floods in Canada inundated crop lands. Excessive rain in India has damaged the onion crop, driving the wholesale price of this staple up 40 percent in the 12 months ending December 2010. Developed countries’ grain stocks, the grain reserves that keep consumption steady when harvests are disrupted or poor will decline by 25 percent in the 2010-2011 crop year.

The rest of the world may feel pressure, too. Drought in Argentina and Brazil, the next biggest corn and soybean exporters after the U.S. Developing world growth may push prices up further this year, says Gary Blumenthal, president and chief executive officer of World Perspectives, a Washington D.C. agricultural consultant.Blumenthal said “imperfect weather has collided with perfect food demand.

Flooded corn fields

Ephraim Leibtag, U.S. Agriculture Dept. food price forecaster, said “Increased global trade coming out of the recession, has increased consumer demand, and higher energy and commodity costs for food production” will boost prices. USDA expects a rise in oil prices to lift demand for ethanol by 5.1 percent in the U.S., which will increase corn prices. USDA estimates U.S. food inflation of 2 percent to 3 percent during the 2011 crop year.

Food prices, especially for wheat and other food grains like rice, have surged back to 2008 levels. The coming 2011 year may see prices rise even further.

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