While many of us here in the United States are focusing on economic recovery, much of the rest of the world is concerned about more basic needs — like food. In fact, the world is reeling from a food price shock, aka, food inflation, which was exasperated after the U.S. Department Agriculture (USDA) surprised traders by cutting their forecasts for key crops, which sent corn and soybean prices to their highest level in 30 months. Specifically, the USDA said corn inventories are expected to decline 5.5% this year to the lowest level in 15 years. Corn is used to make ethanol, which is causing gasoline prices to rise and is an important ingredient in animal feed, so meat prices are rising. The United Nations Food and Agriculture Organization recently warned the world could see another food crisis as grain prices rise further.
Although rice prices, which spurred the last food crisis in 2008, are stable, high grain prices, especially corn, soybeans and wheat, have already caused riots in Algeria and Mozambique. In emerging economies, food is a larger portion of spending than it is in developed countries, and that is why people in emerging countries feel the pinch the most when prices rise. India reported on Friday that their wholesale prices rose to an annual rate of 8.43% in December, up from 7.48% in November. (more)
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