The Index averaged 231 points last month compared to 232 points in July. It was 26 percent higher than in August 2010 but seven points below its all-time high of 238 points in February 2011.
In over two decades of tracking world food prices, the U.N. Food and Agricultural organization index has never stayed so high for so long. This represents true suffering for hundreds of millions of people who live on the edge, for whom food is a large fraction of their income like, say, North Africa (see Expert consensus grows on contribution of record high food prices to Middle East unrest).
And this year’s warming-driven extreme weather is likely to help keep food prices high for a while:
Food prices could rise next year because an unseasonably hot summer likely damaged much of this year’s corn crop….
The estimated surplus is down from last month’s forecast and well below levels that are considered healthy….
“We just didn’t have a good growing year,” said Jason Ward, an analyst with Northstar Commodity in Minneapolis. “It was too hot, too warm, too dry at the wrong time.”
… More expensive corn drives food prices higher because corn is an ingredient in everything from animal feed to cereal to soft drinks.
We are unlikely to return to sustained low food prices for a variety of reasons:
- Relatively high commodity prices are here to stay (see Jeremy Grantham must-read, “Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever”)
- Peak oil in particular is coming sooner than expected and that means the future will bring higher oil prices, a major driver of food prices
- The nation and the world continue to have an untenable biofuels policy (see Food-Based Biofuels Are Helping Drive Up Food Prices and The Corn Ultimatum: How Long Can Americans Keep Burning One Sixth of the World’s Corn Supply in Our Cars?)
- There’s a growing global population that shows no sign of leveling off and may exceed 9 billion by mid-century
- There’s a growing middle class worldwide that is switching to a more meat-based diet, which requires more agricultural land per calorie.
And, on top of that, given our current inaction, climate change is just going to get worse and worse for many decades. I and others have written at length about its dire implications for food security:
- Washington Post, Lester Brown explain how extreme weather, climate change drive record food prices.
- With No End in Sight for Texas Drought, ABC News Explains: “Every Farmer in the World Will Be Affected by Climate Change”
- The Coming Food Crisis: Global food security is stretched to the breaking point, and Russia’s fires and Pakistan’s floods are making a bad situation worse; Podesta, Caldwell: “Lasting gains in agricultural productivity will require … action to confront climate change.”
- How extreme weather could create a global food crisis: 2010 was among the hottest and wettest years on record – we are entering a period of climate and food insecurity
That is the medium- and long-term future. As the FAO documents, the near-term future is not promising either:
Total cereal utilization in 2011/12 is forecast to increase by 1.4 percent, almost matching anticipated 2011 production. As a result, global cereal inventories by the close of seasons in 2012 are likely to remain close to their already low opening levels. Only rice stocks are expected to increase significantly, supported by record production.
Wheat inventories are likely to decline to their lowest level since 2009 and world stocks of coarse grains are also forecast to plunge, with maize inventories falling to 124 million tonnes, their lowest level since 2007. Given the tight global supply and demand balance for coarse grains, its stocks-to-use ratio is forecast to fall to a historical low of 13.4 percent.
The world needs to come together very soon to develop a comprehensive food security strategy because we are headed off a cliff.