According to the FAO latest report on food outlook published on December 9, 2009, global food prices are again on the rise. The FAO composite index for food prices––a basket that includes grain, oleaginous plants, dairy products, meat and sugar––recorded four successive monthly increases to reach an average of 168 points in November 2009.
Such upward change does not worry the FAO. In fact, this level remains 21 percent lower than the high reached in June 2008, at the peak of the food crisis experienced during that year. Incidentally, grain inventories are adequate and production keeps increasing, which makes the recurrence of the 2008 crisis a remote possibility.
But let’s not be misled. If the current circumstances would not lead to new food riots because of favorable market conditions, the situation nevertheless remains critical for many households suffering from poverty. Indeed, high food prices represent a permanent threat, all the more so since they are not immune from sudden price hikes on international markets.
One should not forget that markets could sharply shift without warning. Prior to the 2007/08 food price hike, the index never exceeded 120 points and stayed below 100 points most of the time. The current level is abnormally high. Speculative funds are on the lookout for the slightest price variation enabling them to rake in gains, and this could, at any time, turn a small snag in agricultural commodity prices into a sudden price hike.