By the Blouin News Business staff

Rising global food prices set off alarm bells

by in Global Economy.

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Global food prices have increased by 4% in the first four months of the year, putting an end to the declining trend of prices since August 2012. The grim reality has put pressure on the World Bank to set off alarm bells in its latest edition of Food Price Watch. “It is quite likely that we will experience more food riots in the foreseeable future – that is, if the world continues to have high and volatile food prices,” writes José Cuesta, senior economist at the multilateral institution in a recent blog post.

Prices of wheat and maize (corn) sharply increased between January and April 2014 — of 18% and 12%, respectively — due to growing weather concerns and mounting import demand. Among the worrisome causes of the price increases is that they took place despite continued projections of record grain harvests, stronger stocks expected in 2014, and 2013 bumper crops, warns the Bank. Internationally traded food prices in April 2014 remain 2% lower than in April 2013, and just 16% below their historical peak in August 2012, the report says:

Domestic prices remained mostly stable between January and April 2014, but saw typical fluctuations between countries. For example, monitored markets in Ukraine, Ethiopia, Sudan and Kyrgyzstan saw some of the largest wheat price increases, while in Argentina and Pakistan, prices decreased. Maize prices went up the most in countries such as Ukraine and Russia, but went down markedly in Mozambique. Rice prices increased in Myanmar and Somalia, but declined in Thailand and Cambodia.

The thematic section of the new report discusses an issue that has been around for decades and that is likely to take a greater global presence in the near future: the role that food prices and food shortages may have in sparking social unrest. Dozens of violent episodes erupted across the world during the food price hikes of 2007 and 2008 though what some observers and experts expect to come could be much worse. The close relationship between food insecurity and conflict will be as present — and threatening — as ever. “Over the next few months, we must watch these prices carefully, making sure that any further increases do not put additional pressure on the least well-off around the world, said Ana Revenga, Acting Vice-President for the Poverty Reduction and Economic Management Network of the World Bank Group:

Increasing empirical evidence shows that international food prices and the domestic pass through to local markets of these international prices has a significant role in all types of conflict, from interstate wars to civil wars, regime breakdowns, and communal violence. Food price shocks may cause spontaneous and largely urban sociopolitical instability, with urban food consumers as the primary protesters. In these cases, price shocks can trigger sociopolitical unrest, fueling preexisting grievances—including poverty and other disparities—and highlighting the lack of adequate social safety nets and other compensating policies. This is the case, for example, with protests in Guinea and Mauritania in 2007 and Haiti in 2008.

Looking ahead, uncertainties around the world put upward pressures on prices and could be driven by many factors that are enumerated in the report: weather in the United States and, more globally, El Niño, and a hypothetical escalation of geopolitical tensions in Ukraine. Even more haunting is that the bidirectional connection between food and war is here to stay.

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