Along with historically high oil prices, the price of staples like rice, wheat and corn have doubled in the past year, causing unrest in places that already suffer stability issues.
Canadians might be forgiven for not noticing. The remarkable rise of the loonie has so far largely insulated them from the kind of rampant inflation that is hitting much of the rest of the world. Canadian prices were up 1.8 per cent in February compared with last year, less than half the U.S. inflation rate – a gap economists say is largely due to the strong dollar.
Signs of stress are emerging just about everywhere else. Food riots have erupted in Egypt, Morocco, Senegal and Cameroon. In Thailand, rice farmers are sleeping in their fields to prevent thieves from stealing their crops.
Numerous countries, including Argentina and Vietnam, have capped or taxed exports of key farm products in a bid to quell domestic inflation, running the risk of violating international trade rules. To ease growing shortages, the Philippine government has asked fast-food restaurants to serve less rice with meals to ease shortages.
In Egypt, the price of many basic foods has spiked as much as 50 per cent in a matter of months. In Asia, where rice is part of virtually every meal, prices are rising almost daily.
The United Nations World Food Programme warned this week it will have to ration food aid to cope with soaring grain prices unless it gets an emergency cash infusion of $500-million (U.S.) from donor countries.
“We are seeing a new face of hunger – people who suddenly can no longer afford the food they see on store shelves,” lamented Sheila Sisulu, deputy executive director of hunger solutions for the UNFP. “Prices have soared beyond their reach.”
And yesterday Chinese authorities announced they will pay farmers substantially more for rice and wheat as they try to boost output and cool surging inflation that threatens to spark unrest ahead of the Beijing Olympics.
“This could be the next bubble,” suggested William Cline, an agricultural economist and senior fellow at the Peterson Institute for International Economics in Washington.
The trick is sorting out how much of the recent inflationary burst is permanent, and how much is caused by speculators flocking to commodities to escape the turmoil in financial markets. “There's a lot of speculative money that has gone into commodities as a store of value in turbulent times,” Mr. Cline said.
There are also longer-term factors pushing food prices higher, including global warming, Asia's dramatic economic emergence, $100-a-barrel oil and the United States's love affair with ethanol.
Ah yes. Ethanol: The miracle fuel.
The diversion of crops, such as corn and soybeans, to produce biofuels has raised the price of all crops and diverted fields from food to fuel production.
This, in turn, has sparked growing tension between North and South over agricultural policies. During a visit to London this month, Egyptian Investment Minister Mahmoud Mohieldin complained that U.S. and Europe biofuel subsidies are hurting the world's poor.
“[The market] is out of order,” he told Dow Jones. “It sends the wrong message to the world, especially its poorer nations. It takes from the food of people to feed thirsty automobiles used by the relatively rich.”
A sidebar, The crisis felt round the world, highlights the impact in various countries.