Global Biz

Record high food prices stoke fears for economy

(Agencies)
Updated: 2011-01-07 16:41

Indian interest rate pressure

Food price protests were seen a factor in the ousting of Indonesia's long-term autocrat Suharto in 1998, and anger over a farmland purchased by South Korean firm Daewoo at a time of rising prices was in part blamed for a 2009 coup in Madagascar.

India's food price inflation rose to a one-year high of more than 18 percent in the year to the end of December, data on Thursday showed. That, along with rising fuel prices, is the main reason analysts expect the central bank to raise rates this month.

The Indian government has used a range of measures for years to ensure stable food prices, but since last year has boosted the release of national stocks of grains and has pledged to continue duty-free imports of crude vegetable oils.

In China, several cities have implemented direct controls to limit food price increases and the central government has vowed to eliminate speculation in the country's commodities markets.

The cost of food rose 11.7 percent in the year to November, while non-food items were up just 1.9 percent. But, reflecting concerns that inflation is creeping beyond food to the wider economy, consumer goods prices and housing costs showed clear jumps.

Fu Bingtao, an economist with the Agricultural Bank of China in Beijing, said in a report the price of grains, the country's most important food, would rise in 2011 by 10 percent, adding to an 11.7 percent rise in 2010.

"Speculative trading and hoarding of specific agricultural products may continue," he said.

The FAO said sugar and meat were at their highest since its records began in 1990. Prices were at their highest since 2008 crisis levels for wheat, rice, corn and other cereals.

Benchmark prices solely in Asia for rice suggested a different picture.

The region's staple food now stands at $535 per tonne -- less than half its 2008 levels of more than $1,000 a tonne that prompted several governments at the time to impose curbs on exports to protect their domestic markets.