Sun, February 20, 2011
Business > Economy

Global review: A new global food crisis looms

2011-02-20 13:21:50 GMT2011-02-20 21:21:50(Beijing Time)  Xinhua English

BEIJING, Feb. 20 (Xinhua) -- Soaring food prices, which the World Bank says have hit "dangerous levels," have thrust the issue of food security sharply into the global spotlight over the past week.

From Asia to the Middle East and to Latin America, the trends of food prices have aroused widespread public concerns globally and in the developing world in particular.

World Bank Group President Robert B. Zoellick warned on Tuesday: "Global food prices are rising to dangerous levels and threaten tens of millions of poor people around the world."

Rising food prices have driven an estimated 44 million people into poverty in developing countries since last June, as food costs continue to rise to near 2008 levels.

The latest edition of Food Price Watch, a research publication by the World Bank, showed that its food price index rose by 15 percent between October 2010 and January 2011. It is 29 percent above its level a year earlier and only 3 percent below its 2008 peak.

Then what are the main factors behind the food price spikes?

The answer lies in the ultra-loose monetary policy of the United States, the financialization of the global farm produce market, the development of biofuels and the extreme weather events affecting harvests in the world's main grain-producing areas.

The U.S. Federal Reserve is driving up food prices by cranking up its dollar printing presses and devaluing its own currency. As the U.S. website of Business Insider puts it: "The food crisis is a dollar crisis."

Several years ago, a study by the World Bank concluded that biofuel development in the United States and the European Union were directly responsible for the explosion in grain and food prices worldwide.

The study, once confidential, was revealed by the London-based Guardian newspaper in 2008 and caused a worldwide sensation.

And the increasing financialization of global agricultural product markets in recent years has also made food prices more volatile as investor prediction and panic could expand the range of food price fluctuations.

It must be pointed out that when prices of staple foods soar, its impact varies greatly between poor and rich countries -- from distressing to almost minimal. In some of the poorest countries in the world, people spend a significant portion of their household expenses on food and will feel the pinch as soon as food prices rise.

In efforts to stem spiralling food prices, the international community should strengthen coordination and measures should be taken to urge the developed countries to adopt responsible monetary polices and tighten supervision over staple commodities markets.

As for the developing world, the best way out of the food crisis is to increase agricultural inputs and improve productivity to boost agricultural production and grain supply.

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