Via FT.com
Of the two crises disturbing the world economy – financial disarray and soaring food prices – the latter is the more disturbing. In many developing countries, the poorest quartile of consumers spends close to three-quarters of its income on food. Inevitably, high prices threaten unrest at best and mass starvation at worst.The recent price spikes apply to almost all significant food and feedstuffs (see charts). Yet these jumps are themselves part of a wider range of commodity price rises. Powerful forces are linking prices of energy, industrial raw materials and foodstuffs. Those forces include rapid economic growth in the emerging world, strains on world energy supplies, the weakness of the US dollar and global inflationary pressures.
Yet the food element of this story carries its own significance. As HSBC points out in a recent analysis*, with rice and wheat prices spiking, riots on the streets of the Philippines, Egypt and Haiti and moves by India, Vietnam, Cambodia and China to restrict rice exports, food is suddenly an even hotter issue than normal.
So why have prices of food risen so strongly? Will these higher prices last? What action should be taken in response?
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