Earlier this week, I wrote about rising food commodity prices and concerns that a global food crisis could be approaching as population growth and changing diets propel global demand. Today, I have a few updates on that story.
First, USAToday reported earlier this week that "Wheat continues to Surge Above $10 a bushel":
U.S. wheat prices continued to soar Wednesday as export demand remained robust despite record high prices, with values in the United States rising by the maximum allowed in a trading day and helping to rally corn and soybeans. Overall, wheat prices have doubled since last June at the Chicago Mercantile Exchange (CME), which owns the Chicago Board of Trade. Prices have been pushed higher by surging world demand and bad weather in some major producing nations.
The report went on to note that:
Egypt, one of the world's largest importers of wheat, bought 150,000 tons of the grain, including 25,000 tons from the United States, the world's top exporter of wheat. "That is such an important factor in the wheat market," says grains analyst Bill Nelson of A.G. Edwards, referring to the purchase by Egypt. "Egypt is being seen as a proxy for world grain buyers who are, in general, willing to buy grain even at record prices. This is evidence that day after day of record prices are not limiting demand," he says.
Meanwhile, press reports from the Middle East this week highlighted a recent Merrill Lynch story about the rising threat of agflation. This story “Families to Suffer as Global Food Crunch Sends Prices Soaring” appeared in ArabianBusiness.com:
The cost of basic foods will continue to rise in the Middle East as demand from emerging markets drives a global agricultural commodity crunch, Merrill Lynch said on Tuesday. The investment bank said in a report that rapid economic development in countries such as China and India was driving demand for food up sharply, adding pressure to the supply chain and sending prices skyrocketing. It said economic development, combined with pollution and a lack of water for irrigation, were putting serious constraints on the amount of arable land available. “Global constraints on food production are shifting production patterns and pressuring prices,” the bank said. Merrill said agricultural inflation, or agflation, was beginning to have a substantial impact on inflation in emerging markets.
The Middle East news report noted the impact of agflation on Egypt and other Middle Eastern countries:
Merrill said Egypt’s consumer price index (CPI) for food and non-alcoholic beverages peaked above 17% for 2007, while Saudi Arabia's foodstuff and beverages CPI soared past 9%. According to the Saudi Trade Ministry, prices of food products, which account for the largest chunk of a family's spending, may rise by up to 30% in 2008 due largely to a drop in global supplies. In the UAE, costs of basic foods such as eggs and bread rose by as much as 30% in 2007, contributing to record inflation in the Emirates.
It’s worth noting, perhaps, that the population of Egypt already a major grain importer, is expected to jump from 73 million today to 118 million by 2050. Saudi Arabia’s population is expected to grow from 28 million today to 50 million by 2050.
