Although the main crop season in the Northern Hemisphere still is weeks away, 2011 may be an acme year for food prices based on commodity index values at the start of the year.
The United Nations’ Food and Agriculture Organization’s Global Food Price Index increased for the seventh consecutive month in January to a record high 231% of the base, up 3% from December, up 28% from January 2010 and above the 2007-08 level when most commodity prices set record highs.
“The new figures clearly show that the upward pressure on world food prices is not abating,” said Abdolreza Abbassian, an economist with the F.A.O. “These high prices are likely to persist in the months to come. The only encouraging factor so far stems from the number of countries where — due to good harvests — domestic prices of some of the food staples remain low compared to world prices.”
Rice, a global food staple along with wheat, may be something of an exception as the F.A.O. said export prices dropped 4% in January “following improved market availabilities from the main crop harvests in major producing Asian
countries.” The F.A.O. said the benchmark Thailand rice export price averaged $542 a tonne in January, down 10% from a year earlier and 44% below the May 2008 peak. U.S. rough rice futures prices were trading above $16 a cwt in Chicago, up about $2.25 a cwt, or more than 15%, since early January, but still more than 30% below highs above $24 a cwt in April 2008. Both U.S. and world rice production were record high in 2010.
The F.A.O. said prices of all commodity groups in its index posted strong gains from December except for meat, which was unchanged.
The Cereal Price Index was the highest since July 2008 but was 11% below its peak in April 2008. International wheat prices rose 4% in January following strong export demand and tightening supplies of high quality wheat, the F.A.O. said. The benchmark U.S. No. 2 hard red winter wheat averaged $340 a tonne in January, 59% above a year earlier but 29% below its March 2008 high. International corn prices also rose 4% in January, the F.A.O. said. The U.S. benchmark No. 2 yellow corn was $263 a tonne, 58% above a year earlier and only 6% below the June 2008 peak.
The F.A.O. Oils/Fats Price Index was near its June 2008 record high but the Dairy Price Index was 17% below its November 2007 peak.
“The F.A.O. Sugar Price Index averaged 420 points in January, up 5.4% from December,” the F.A.O. said. “International sugar prices remain high, driven by tight global supplies.”
The U.S. Department of Agriculture in its January Agricultural Prices report put the preliminary U.S. Food Commodities Index at 160% of the 1990 base of 100, up 5% from December and up 16% from January 2010.
Some additional light was shed on grain and oilseed supplies last week as the U.S.D.A. trimmed projected 2011 U.S. corn carryover from its January estimates and left wheat and soybean carryover projections unchanged in its Feb. 9 World Agricultural Supply and Demand Estimates.
At 675 million bus, U.S. 2010-11 corn ending stocks were 9% below the January projection and 60% below the 2009-10 level. The stocks-to-use ratio fell to 5%, the same as in 1995-96.
“Corn prices rose sharply in the spring and summer of 2006 to ration usage ahead of the 2006 harvest,” the U.S.D.A. said.
U.S. futures markets reacted with gains of more than 20c a bu in the three nearby corn contracts, pushing prices to a 31-month high above $7 a bu Feb. 9. The gains in corn prices pulled wheat and soybean futures higher as well.
The U.S.D.A. also trimmed U.S. 2010-11 sugar ending stocks to 1,348,000 tons, down 4% from January and 10% below the 2009-10 level.
“The protests and disturbances in the Middle East coincide with another period of rising food prices,” said Josette Sheeran, executive director of the World Food Program. “When it comes to food, the margins between stability and chaos are perilously thin. It is still too early to quantify the role that rising food prices are playing in the current wave of discontent, but we know that during the high food price crises of 2008, food prices were a factor in causing riots and anti-government protests. Volatility on the markets can translate quickly to volatility on the streets and we all should remain vigilant.”