World Bank says elevated food prices are driving many people to poverty.
From the World Bank’s press release
Driven in part by higher fuel costs connected to events in the Middle East and North Africa, global food prices are 36 percent above their levels a year ago and remain volatile, pushing people deeper into poverty, according to new World Bank Group numbers released today.
“More poor people are suffering and more people could become poor because of high and volatile food prices,” said World Bank Group President Robert B. Zoellick. “We have to put food first and protect the poor and vulnerable, who spend most of their money on food.”
According to the latest edition of the World Bank’s Food Price Watch, a further 10 percent increase in global prices could drive an additional 10 million people below the $1.25 extreme poverty line. A 30 percent price hike could lead to 34 million more poor. This is in addition to the 44 million people who have been driven into poverty since last June as a result of the spikes. The World Bank estimates there are about 1.2 billion people living below the poverty line of US$1.25 a day.
The World Bank’s food price index, which measures global prices, is 36 percent above its level a year earlier and remains close to its 2008 peak. Key increases compared to a year ago include maize (74 percent), wheat (69 percent), soybeans (36 percent) and sugar (21 percent), although rice prices have been stable. In many countries, vegetables, meats, fruits and cooking oil continued to rise with potentially adverse nutritional consequences for the poor.
Aside from high fuel costs, the World Bank blames higher food prices on other factors as the weather.
Food prices have soared due to severe weather events in key grain exporting countries, export restrictions, the increasing use for biofuel production, and low global stocks. The food price hike is also linked to surging fuel prices -- crude oil increased 21 percent in the first quarter of 2011as a result of unrest in the Middle East and North Africa.
chart from World Bank’s Food Price Watch "Correlation isn't causation"
The World Bank isn’t being forthright.
Since agricultural products have been the least globalized this means that any localized imbalances should translate to local and not to higher global prices.
Say a drought happens in country A, then A suffers higher food prices (and possibly some trading partners who depend on A for specific agri or food based products) but not the world and certainly not most of the commodities.
Furthermore, if price signals work in the domestic markets then such imbalances should translate to an anomaly or an ephemeral event and not sustained price increases.
Alternatively, general price increases in commodity prices won’t happen if the imbalance engendered have been caused mainly by non-monetary factors. That's because higher spending in some areas will be offset by lower spending in others. Only central bank inflationism can bring about generalized price increases.
Obviously, like almost all governments, all the blame will fall on the weather, corporate greed, Middle East crisis, fuel prices, and etc… but never on the inflationism applied by central banks. (The Bank of Japan is an exception in admitting monetary policies as responsible for food price hikes, but they have been responsible for inflationism too)
The World Bank mentions ‘exports restrictions’ (which deserves applause) but keeps mum on who has instituted "increased biofuel production". This only implies that distortive administrative policies (subsidies, tariffs, price controls et. al.) have partly been responsible (as aggravating factors).
All these “anything-but-the-government/central bank-to-blame” appears to be part of the public conditioning for the next step—massive price controls.
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