Sunday, February 17

Food prices getting dangerously high

I have been warning about dangerously high food prices on this blog for some time now. I was at a dinner last week, and it was a dinner to talk about the business risks of 2018. Risks in 10 years time. And nowhere I could see the costs of basic amenities on the list. And unfortunately, when I discussed it, there was no reaction from the group other than one or two nods.

Here's an article which shows how the situation is getting even worse than I had talked about. It is the developing countries which will get hit the worst and they are the countries which are least able to handle this rapid rise in food grain prices. And no, you cannot say that let the market rule, the state is there to protect the most vulnerable of its citizens and the basic need is for food, clothing and shelter. Even if you say that emergency clothing and shelter is available, you dont have riots for clothing. You do have riots for food. Let me quote some extracts:

The world’s poor countries will have to pay 35 per cent more for their cereals imports – taking the total cost to a record $33.1bn (€22.8bn, £17bn) – in the year to July 2008, even as their food purchases decline by 2 per cent. Food consumption per capita will suffer a slight drop.The rising cereal imports bill has triggered an increase in food subsidies in countries such as Egypt, Oman and Pakistan, retail price freezes in Russia and China, and large reductions in cereals import tariffs. The world’s largest importer of wheat is Egypt. “We cannot raise the prices of subsidised food so every increase [in international prices] is absorbed by the state,” Mr Mostapha said. “The bread subsidy alone went up by around $820m last year to reach $2.45bn.”

This will lead to riots and unfortunately some geo-political issues as there is nothing like a little war to get minds off their hunger.

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