Food prices to rise sharply as more struggle to put meals on their tables
Posted Monday, January 24 2011 at 00:00
A projected sharp rise in agricultural commodity prices could hurt growth prospects for economies within the East African region at a time when they are smarting from the 2008 food crisis.
With warnings of low food supplies including maize, predictions by the Economist Intelligence Unit (EIU) show agricultural commodity prices will rise by at least 13 per cent in 2011.
The prices of maize, rice, sugar, wheat, coffee and tea are expected to rise to levels last seen in 2008 on renewed demand from countries such as China and India, posing a fresh challenge to economic management in emerging countries.
This upturn in commodity prices in the international market, also expected in crude oil, base metals and fibres, analysts said, is likely to bring home expensive fuel, motor tyres and construction materials such as corrugated iron sheets, paints, metal reinforcements and electricity cables––hurting economic expansion in most economies.
The EIU’s food, feedstuffs and beverages (FFB) index is estimated to have risen by nearly 11 per cent in 2010, following a surge in agricultural commodity prices, particularly grains, in the second half of the year.
Consequently, high food prices are expected to move to the top of policy makers’ agendas because of worries about the impact on inflation, protectionism and unrest.
The United Nations’ Food and Agricultural Organisation said last week that food prices hit a record high last month, above 2008 levels when riots broke out in countries as far afield as Egypt, Cameroon and Haiti.
FAO’s Cereals Price Index, which includes prices of main food staples such as wheat, rice and maize, rose to an average of 237.6 points in December, the highest level since August 2008 and up from 223.3 points in November.
The Oils Price Index also jumped to 263.0 points in December from 243.3 points in November.
Kenya is for example, facing prospects of high food prices with meteorologists predicting that the first half of the new year will be dry, hurting food production and casting a heavy cloud over the economy that grew by 6.1 per cent for the nine months to September 2010.
The dry weather run may also herald higher electricity tariffs and water rationing as industries struggle to shake off high production costs.
In Uganda, food prices continued to register volatile prices resulting from instability in pump prices and the general scarcity of food items, exerting pressure on the food basket due to persistent demand from neighbouring countries.
Tanzanian President Jakaya Kikwete has warned the country could face food shortages in 2011 because many parts of the country experienced lower-than-expected rainfall, adding that his government planned to raise its strategic grain reserve to 400,000 tonnes by 2015.
The International Monetary Fund in its latest global outlook has given a similar projection on the prices of commodities.