Page last updated at 16:34 GMT, Wednesday, 15 October 2008 17:34 UK

Q&A: World food prices

Combine harvester

The price of the major foodstuffs consumed by the vast majority of the world - wheat, rice and maize - hit historically high levels on international markets earlier this year.

The surge in prices sparked riots in a number of countries, including Haiti, the Philippines and Egypt, as consumers struggled to afford even basic food items.

Prices may have dipped recently, but the UN's food agency has warned that the current global financial crisis could trigger a further problems next year.

BBC News looks at the prospects for food prices and food security around the world.

What has happened to prices?

The price of major foodstuffs peaked in the early part of this year.

Before then, the price of wheat had risen a whopping 130% in the twelve months to March.

Soya had risen 87% and rice had jumped 74% in the same period.

The UN's Food and Agriculture Organisation (FAO) said the food crisis had thrown an additional 75 million people into hunger and poverty in 2007 alone.

Prices have been falling steadily since their peaks in February and March, but they are still at historically high levels.

The FAO pointed out in August, for example, that although food prices had fallen by 6% on average that month, prices were still 13% higher than they were in August 2007 and 60% higher than in August 2006.

What's behind the changes?

First the rises.

The world saw a perfect storm of factors that all came together to push food prices up: population growth, changing diets, higher transport costs and a drive towards bio-fuels.

The main long-term factor is the growth in the world's population, which is expected to top nine billion by the middle of the century.

More mouths to feed puts pressure on a range of resources, including land, water and oil, as well as food supply.

But lurking behind the headline figures for population is an even more significant factor pushing up prices, and that's the economic miracle driving emerging economies such as China and India.

To put it bluntly, rich people eat more than poor people, and all this economic growth is generating a whole new tier of middle-class consumers who buy more dairy products, meat and processed food.

There is also the added environmental pressure all these extra people are loading onto the planet, as well as the impact of climate change, which also contributed to higher prices.

Desertification is accelerating in China and sub-Saharan Africa, while more frequent flooding and changing patterns of rainfall are already beginning to have a significant impact on agricultural production.

And global warming has played a significant role in another driver of rising prices: the shift in agricultural production from food to biofuels.

Ethanol production is on course to account for some 30% of the US corn crop by 2010, dramatically curtailing the amount of land available for food crops and pushing up the price of corn flour on international commodity markets.

Surging oil prices, which peaked at $147 a barrel in July, also pushed up the cost of transporting food and the price of fertilisers.

So why have prices been falling recently?

The decline in oil prices has certainly helped. In the past few days, uncertainty about the global economy has seen prices fall below $80 a barrel.

But the main factor is that harvests are expected to be up this year, with cereal harvests in particular predicted to hit record levels.

The FAO's most recent outlook suggested crops would be 4.9% higher in 2008 at a record 2,232 million tonnes.

Who are the winners and losers from higher food prices?

The main losers have been poor people who live in cities in developing countries, who have faced higher prices for imported food on low incomes.

Food riots from Haiti to Indonesia caused political instability earlier this year.

The World Bank also warned that the high price of food could lead to developing countries missing international poverty targets.

The recent dip in prices has provided some relief, but the FAO says 36 countries are still in need of external assistance because of continuing local high prices, crop failures or conflict.

The main gainers have been farmers in rich and emerging market nations like the US, Brazil, Argentina, Canada and Australia, who are getting record prices for their harvests.

Some poor farmers have also benefited from higher prices.

What is being done?

Some countries are subsidising the price of food for their citizens, although the levels of help had to be cut in some cases as prices continued to rise.

At a major international summit on the food crisis in Rome in June, leaders from 181 countries said global food production must be doubled by 2030.

The meeting resolved to support farmers in poor countries better and agreed to bolster humanitarian interventions to help deal with shortages and soaring prices.

An extra $1.2bn (613m) in food aid was pledged to help 75 million people in 60 nations.

But UN Secretary General Ban Ki-moon warned up to $20bn (10.2bn) a year was needed to alleviate the crisis.

What impact could the financial crisis have?

The FAO is concerned that the financial turmoil gripping economies around the world could lead government's to reduce the aid they give developing countries. It could also force states to introduce protectionist measures that would reduce food exports.

Its director general Jacques Diouf warned that if this happens, another food crisis could occur next year.

"Last year it was the pan," Mr Diouf said, "but next year could be the fire."

He also cautioned that falling food prices could cause farmers to cut back on plantings which could lead to reduced harvests in major food exporting countries.

"Borrowing, bank lending, official development aid, foreign direct investment and workers' remittances - all may be compromised by a deepening financial crisis," Mr Diouf said.


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