Food price inflation

It's interesting to listen to or read reports about economic trends indicating that inflation is at historically low levels.  In the U.S., those reports almost always reference "core inflation" - which excludes food an energy prices.

As I surf the 'net, I'm encountering more and more articles pointing to a surge in food prices.  These excerpts from The Independent:

A food crisis could overtake the world in 2011, according to the Food and Agriculture Organisation, an agency of the United Nations.

Climate change, speculation, competing uses such as biofuels and soaring demand from emerging markets in East Asia are the factors that will push global food prices sharply higher next year, claims the FAO.

The FAO warns the world to "be prepared" for more price hikes and volatility if production and stocks do not respond. Price hikes of 41 per cent in wheat, 47 per cent in maize and a third in sugar are foreseen by the FAO. The last time that happened it sparked riots from Mexico to Indonesia.

In its latest Food Outlook the FAO says that the prices of many staple crops will rise by up to half next year, with many returning to the peaks seen during the food crisis of 2008, or even exceeding them in some cases. Apart from driving inflation higher in Britain and the rest of the Western world, another bout of food price hyperinflation has grim implications for the poorest people on the planet, even now hardly able to afford to feed themselves.

The FAO's broad global index of food prices has risen to 197.1 points, up about 5 per cent on the previous month alone, and already beyond the levels seen in the initial stages of the prices spikes in 2007 to 2008.

The graph embedded above comes from a Business Insider article published in September and shows data points only through July.

There may be a decent case for deflation in many parts of the U.S. economy, given a surplus of capacity and subdued U.S. demand, but for agriculture it's an entirely different story.

Agricultural demand isn't primarily driven by the U.S.  Its major growth driver comes from emerging markets consumption, and even as developed markets remain mired by sub-par economic growth, emerging economies are charging forward. They're getting wealthier, and scaling up their diets to include more meats and oil seeds (such as soybeans) in turn.

Yesterday I found an interesting blog called Resources Research, which offered these comments re sugar consumption.

The group forecast that world sugar consumption will rise to 257m tonnes in 2030, boosted by growth in China and India, where rising wealth and population growth will foster doubling in demand. “Asia will become the largest sugar-consuming region, reflecting the rising economic status of India and China...”

Interesting.  I expect we'll be hearing more about this in the mainstream media in the coming year.