February 15th, 2011Today there are three sources of growing demand for food: population growth; rising affluence and the associated jump in meat, milk, and egg consumption; and the use of grain to produce fuel for cars.
In early January, the U.N. Food and Agriculture Organization (FAO) reported that its Food Price Index had reached an all-time high in December, exceeding the previous record set during the 2007-08 price surge. Even more alarming, on February 3rd, the FAO announced that the December record had been broken in January as prices climbed an additional 3 percent.
Will this rise in food prices continue in the months ahead? In all likelihood we will see further rises that will take the world into uncharted territory in the relationship between food prices and political stability.
Everything now depends on this year’s harvest. Lowering food prices to a more comfortable level will require a bumper grain harvest, one much larger than the record harvest of 2008 that combined with the economic recession to end the 2007-08 grain price climb.
If the world has a poor harvest this year, food prices will rise to previously unimaginable levels. Food riots will multiply, political unrest will spread and governments will fall. The world is now one poor harvest away from chaos in world grain markets.