World Bank: Food prices have entered the 'danger zone'
Philip Aldrick, Economics Editor in Washington
Robert Zoellick, World Bank president, said food prices are at “a tipping point”, having risen 36pc in the last year to levels close to their 2008 peak. The rising cost of food has been much more dramatic in low-income countries, pushing 44m people into poverty since June last year.
Another 10pc rise in food prices would push 10m into extreme poverty, defined as an effective income of less than $1.25 a day. Already, the world’s poor number 1.2bn.
Mr Zoellick said he saw no short term reversal in the damaging effect of food inflation, which is felt much more in the developing world as packaging and distribution accounts for a far larger proportion of the cost in the advanced economies.
Asked if he thought prices would remain high for a year, Mr Zoellick said: “The general trend lines are ones where we are in a danger zone… because prices have already gone up and stocks are relatively low.”
Rising prices have been driven by the changing diet of the ballooning middle classes in the emerging markets. “There is a demand change going on, with the higher incomes in developing countries. People will eat more meat products, for example, that will use more grain.
“I am not suggesting that the improved diets in the developing world are the source of the problem but it means it takes longer to rebuild the stocks when you get a supply [shock].”
The problem has been exacerbated by “weather problems in Russia, Ukraine, North America, China”.
Making matters worse has been rising fuel prices, which go into fertilisers and energy.
However, he played down the impact of speculators on prices, saying only that “it can exacerbate some of the shifts”.
He also raised concerns about the food investment policies of some of the world’s wealthier nations in poorer countries. China has been buying up huge tracts of Africa to grow enough food to feed its growing middle class.
Using Saudi Arabia’s decision to scrap wheat production and invest overseas for food instead as an example, he said: “This raises sensitivities about the purchasing and investment and the land.
“We are now working with the Food and Agriculture Organisation on responsible principles for food investment – this has included sub-Saharan Africa, also some in central Asia – the idea that investment can be helpful and create additional food production, but one needs to do it in a way that helps the local people and meets local needs.”
The World Bank is investing $7bn in improving agricultural production, from seeds to irrigation to sewage. One key area of research is in developing better seeds.