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Wheat leads soaring global food prices

Latest update : 2008-02-26

The price of top quality wheat rose 22% on US markets Monday - the highest one-day increase ever. The upsurge occurred after key producer Kazakhstan imposed export restrictions. Other food commodities are getting increasingly expensive.

The price of food commodities has been skyrocketing globally because of growing purchasing power in emerging countries such as China, the development of the biofuels industry and speculation on commodity markets.


"This phenomenon accelerated in 2007," after it started two years ago, Chris Lupoli, an inflation specialist with UBS bank, told the AFP.


The UN Food and Agriculture Organisation's global price index surged 40% last year.


Wheat has been leading the way with a 287% price increase on world commodity markets since January 1st, 2006. Maize and soybean have shot up by 149% and 129% respectively, rice by 60% and coffee by 139%, Natixis bank's commodities analyst Thierry Lefrançois told the AFP.


The change of lifestyle in emerging countries such as China is a first reason for the upsurge in food prices. Growing meat consumption means more animals, i.e. more maize, wheat and soybeans to feed them.


"Many wheather events in the past two years have also had an impact," especially drought in Australia, Lefrançois added. 


He also pointed to poor planning at EU level: "The common agricultural policy (CAP) has led to a shrinkage in cultivated land" as the authorities were betting on decreasing consumption, he said.


Growing interest in biofuels in Europe and in the US also leads to "the use of cereals and oilseed to produce bioethanol or biodiesel, which competes with the use of those resources for food purposes," Lupoli said.


Finally, as uncertainty dominates the economy, investors have been focusing on commodities - including foodstuffs - as safer investment products.

Date created : 2008-02-26