Food Prices Surge Again In February

World food prices once again rose to fresh historic highs, for the eigth consecutive month. Prices rose 2.2% in one month from January to February, according to the UN Food and Agriculture Organization (FAO).

FAO Food Price Index – 1991 – February 2011

Of particular importance were the prices of cereals, which rose 3.7% in one month. The cereal price index includes prices of the main food staples in many countries, such as wheat, rice and maize.

Food prices are expected to continue to climb even if harvests expand, according to Bloomberg. That’s because after three years of poor harvests, stockpiles are low, and it will take at least two or three years of good harvests to rebuild stockpiles.

The original Tunisia uprising began as food riots in January, and high food prices have fueled the Arab uprisings in country after country. This is having a feedback effect, since the uprisings themselves are affecting the production of food in those countries, pushing prices still higher. The uprising in Libya is causing the price of oil to surge, and higher oil prices leading to sprialling shipping costs that will drive food inflation even higher, according to Reuters.

A new IMF report says that high food prices are here to stay because of structural issues:

• As consumers in developing countries become wealthier, they change their diets away from grains and toward high-protein foods such as meat, dairy products, edible oils, fruits and vegetables, and seafood. These foods are more expensive to produce.
• In 2010, the production of corn-based ethanol absorbed some 15% of the global corn crop. Cane sugar, palm kernels and rapeseed are also used for biofuels.
• During the last decade, global productivity growth — as measured by the amount of crop produced per hectare — has fallen for rice and wheat compared with the 1980s and 1990s and has been broadly stagnant for corn and soybeans. Less productivity growth means higher prices, everything else being equal.
• To produce more food, farmers have had to plant and harvest more acreage, and this has forced them on to marginal land that’s less productive.

These structural problems have come at a time of weather-related supply shocks, including drought and wildfires in Russia, a hot and wet summer in the U.S., and one of the strongest La Niña weather episodes in the past 50 years, affecting food production in Asia.

Food prices have been increasing almost steadily since 2002, in good times and bad, in good weather or bad. From the point of view of Generational Dynamics, we’re continuing to see what I call the “Malthus Effect,” a continuing increase in the price of food as the population grows faster than the supply of food, especially during a generational Crisis era.