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class=Apple-style-span size=5 face=Verdana><SPAN style="FONT-SIZE: 18px"
class=Apple-style-span>The coming hunger: Record food prices put world 'in
danger', says UN</SPAN></FONT></P>
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class=tagline>The Independent</P>
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class=tagline>Perfect storm of climate and oil puts world into 'danger
territory'</P>
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class=author><AUTHOR>By Sean O'Grady, Economics Editor</AUTHOR><BR></P>
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class=info><EM style="FONT-STYLE: normal; FONT-SIZE: 10px">Thursday, 6 January
20 <SPAN style="WHITE-SPACE: pre" class=Apple-tab-span>
</SPAN></EM></P></DIV>
<DIV
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style="LINE-HEIGHT: 21px; FONT-SIZE: 18px" class=Apple-style-span>Food riots,
geopolitical tensions, global inflation and increasing hunger among the planet's
poorest people are the likely effects of a new surge in world food prices, which
have hit an all-time high according to the United Nations.</SPAN></DIV>
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<DIV
style="PADDING-BOTTOM: 0px; MARGIN: 0px 0px 10px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px">The
UN's index of food prices – an international basket comprising wheat, corn,
dairy produce, meat and sugar – stands at its highest since the index started in
1990, surpassing even the peaks seen during the 2008 food crisis, which prompted
civil disturbances from Mexico to Indonesia.</DIV>
<P
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class=font-null>"We are entering danger territory," said the UN Food and
Agriculture Organisation's chief economist, Abdolreza Abbassian.</P>
<P
style="PADDING-BOTTOM: 0px; MARGIN: 0px 0px 10px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"
class=font-null>Global food prices have risen for the sixth month in succession.
Wheat has almost doubled since June, sugar is at a 30-year high, and pork is up
by a quarter since the beginning of 2010.</P>
<P
style="PADDING-BOTTOM: 0px; MARGIN: 0px 0px 10px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"
class=font-null>The trends have already affected the UK where the jump in food
prices in November was the highest since 1976. Meat and poultry were up 1 per
cent and fruit by 7.5 per cent in one month.</P>
<P
style="PADDING-BOTTOM: 0px; MARGIN: 0px 0px 10px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"
class=font-null>Food producers have been told to expect the wheat price to jump
again this month, hitting bakers and the makers of everything from pasta to
biscuits.</P>
<P
style="PADDING-BOTTOM: 0px; MARGIN: 0px 0px 10px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"
class=font-null>More is sure to follow and that in turn will add to pressure on
the Bank of England to raise interest rates to control rising prices. Higher
mortgage bills by the end of the year will add to the unpleasantness facing
"middle England" from a year of tax hikes and below-inflation pay rises.</P>
<P
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class=font-null>However, the biggest impact of the food price shock will be felt
in countries in the developing world where staple items command a much larger
share of household incomes.</P>
<P
style="PADDING-BOTTOM: 0px; MARGIN: 0px 0px 10px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"
class=font-null>Economists warn that "soft commodity" food prices show little
sign of stabilising, and that cereals and sugar in particular may surge even
higher in coming months. In addition, long-term trends associated with growth in
population and climate change may mean higher food costs become a permanent
feature of economic life, even though the current spike may end in due course.
Speculation, too, may be part of the crisis, as investors climb on to the rising
food-price bandwagon.</P>
<P
style="PADDING-BOTTOM: 0px; MARGIN: 0px 0px 10px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"
class=font-null>Mr Abbassian said the UN agency is concerned by the
unpredictability of weather activity, which many experts link to climate change.
He said: "There is still room for prices to go up much higher, if for example
the dry conditions in Argentina tend to become a drought, and if we start having
problems with winterkill in the northern hemisphere for the wheat crops."</P>
<P
style="PADDING-BOTTOM: 0px; MARGIN: 0px 0px 10px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"
class=font-null>One concern, especially in Ukraine and Russia, is that the cold
winter, following disastrous droughts and summer fires, will have damaged the
seeds for next year's crops, leading to an even more acute crisis than seen last
year. Government policies, especially the export bans imposed by nervous Indian
and Russian governments, have exacerbated such problems in world markets.</P>
<P
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class=font-null>Meanwhile, burgeoning consumption in the booming economies of
east Asia and the pressure exerted by the demand for crops for biofuels rather
than food, especially in the US, is adding to the unprecedented squeeze on world
food supplies.</P>
<P
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class=font-null>The latest surge in crude oil prices adds to the risk of
turmoil. Many experts say oil prices show few signs of abating, and the price of
a barrel is set to breach the $100 barrier again soon. Opec officials yesterday
said they were happy with such a level. Oil peaked at just under $150 a barrel
in 2008; any sign of renewed tension in Iran would see the price exceed that.
Higher oil prices add to food price inflation by increasing transportation
costs.</P>
<P
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class=font-null>The interplay of rising fuel prices, the growing use of
biofuels, bad weather and soaring futures markets drove up the price of food
dramatically in 2008, prompting violent protests in Mexico, Indonesia, Egypt,
Cameroon and Haiti. Last year's spike was provoked mainly by the freakish
weather conditions in Russia and Ukraine, but one of the underlying trends is
the growing and changing appetites of east Asia.</P>
<P
style="PADDING-BOTTOM: 0px; MARGIN: 0px 0px 10px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"
class=font-null>As more Chinese enter the middle classes they tend to consume
more poultry and meat, just as Westerners did at a similar stage in their
economic progress. However, meat and poultry husbandry consumes at least three
times the resources that grains do, while the drift towards the cities in China
is reducing the yields of its farms. Similar trends are visible in the other
fast-growing, populous nations such as Brazil, India and Indonesia.</P>
<P
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class=font-null>Countries that are poor and produce relatively little of their
own food are most vulnerable to the food price shock – Bangladesh, Morocco and
Nigeria top the "at risk" list, according to research by Nomura economists, who
also identify growing shortages of water as a critical factor restraining any
growth in agricultural productivity.</P>
<P
style="PADDING-BOTTOM: 0px; MARGIN: 0px 0px 10px; PADDING-LEFT: 0px; PADDING-RIGHT: 0px; PADDING-TOP: 0px"
class=font-null>Owen Job, strategist at Nomura, said: "The economists' model of
increasing supply as demand grows may be breaking down. Supply cannot keep up
with factors such as biofuels and the urbanisation of China. Some 30 per cent of
all water used in agriculture comes from unsustainable sources."</P>
<P
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class=font-null>* David Cameron has disclosed that the Treasury was considering
introducing a "fuel stabiliser". Under the move, tax paid by motorists would be
cut when the cost of oil surged worldwide and rise when it dropped. He said: "We
are looking at it. It's not simple but I would like to try and find some way of
sharing the risk of higher fuel prices with the
consumer."</P></DIV></FONT></DIV></BODY></HTML>