AGRICULTURE:

Food prices hit record high, spurring worries about global unrest

UNITED NATIONS -- Food prices are continuing their global surge, raising the specter of unrest in developing nations.

The global food price index hit a new record high for the third straight month, the Rome-based Food and Agriculture Organization said today. The index averaged 236 points in February, 2.2 percent higher than the previous all-time high set in January.

The index averaged 90 when FAO first began tracking world food prices in 1990. February's monthly high is 36 points higher than the average for all of 2008, when soaring prices sparked rioting and food-export bans in some developing nations.

The index -- a compilation of price data for sugar, cereals, oils, meat and dairy products -- has gradually risen every month for the past eight months. The trend began last July, when summer floods in Pakistan, droughts in Australia and Canada, and wildfires in Russia shrank global food stores and saw market speculators return in force to commodities.

News of fresh spikes in food prices also comes on the heels of crude oil reaching $100 a barrel. U.S. crude oil futures prices closed above the century mark for the first time in three years at the close of trading Tuesday.

Wheat prices soared in February on U.S. commodities exchanges, but they have since fallen back to January levels. Meanwhile, corn prices continue to climb, rising by around 33 percent since December 2010. FAO and other food market experts are starting to acknowledge that biofuel policies supporting the ethanol industry in the United States are a strong factor behind the rise of corn prices. Soybean prices have fallen slightly after steadily rising since December.

Cereal prices rose 3.7 percent over January averages. Meat and dairy prices expanded by 2 percent and 4 percent, respectively.

FAO officials say the world can expect further price rises if oil prices continue climbing.

"Unexpected oil price spikes could further exacerbate an already precarious situation in food markets," FAO's director of trade and markets, David Hallam, said in his agency's report. "This adds even more uncertainty concerning the price outlook just as plantings for crops in some of the major growing regions are about to start."

During the last record run-up in world food prices, FAO hosted a series of conferences aimed at encouraging governments to support agricultural development in poor countries, but there has been little follow-up.

Nations are now in the midst of negotiations on possible changes to the Food Aid Convention, a treaty that governs how countries distribute food aid.

Eighty percent of that aid goes toward emergencies rather than malnutrition programs as was common in the past. The United Nations wants rich governments to focus more development aid dollars toward helping poor countries improve their own domestic agriculture sectors and markets.

U.N. officials also want the United States to donate more food aid in the form of direct purchases from developing countries close to crisis points, rather than the current congressional mandate that almost all food aid be bought in the United States and shipped from there.

The World Food Programme estimates that the cost of purchasing and shipping U.S. food to crises eats up roughly half the value of all U.S. food aid.

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