World Food Prices Are Going To "Danger Zone"

Food price index of the United Nations has increased for the sixth consecutive month at its highest since records began in 1990. The rising price of sugar, cereals and oilseeds was driving global food prices to record levels in December, surpassing the 2008 level, when the cost of food has caused riots around the world and prompted warnings of price "danger zone".

An index compiled monthly by the United Nations released its previous monthly record - June 2008 - in December to its highest level since records began in 1990. Published by the Rome-based Food and Agriculture, the index tracks prices of a basket of cereals, oilseeds, dairy products, meat and sugar, and rose for six consecutive months.

Abdolreza Abbas, Sian, an economist at the FAO, told the Guardian: "We are entering a danger zone." But he stressed that the situation was not as bad as 2008.

The price of sugar and meat are at record levels, while corn prices are back to levels not seen since 2008, when riots in Haiti, killing four people and riots in Cameroon has left 40 dead.

Abbassian warned prices could rise even higher, amid fears of drought and floods in Argentina, Australia and the cold kills the plants in the northern hemisphere.

"There is still room for prices to rise much higher if, for example, dry conditions in Argentina tend to be a drought and if we start having problems with winterkill in the northern hemisphere for the wheat crop, "said Abbassian.

Prices rose steadily, but Abbassian said he had expected food prices begin to fall, because many poor countries have a good harvest last year.

But this was not the case after the unpredictable weather caused poor wheat harvest in Russia. Last year, wheat prices have doubled European corn from the United States rose by over 50% and soybean prices in the United States jumped more than 30%.

The current floods in Australia have the potential to affect prices of commodities such as sugar cane growers are warning of production problems up to three years. Wheat supplies should hit - Australia's largest exporter of wheat in the fourth - and the country is also the largest exporter of coking coal, whose production is also affected by the floods.

At the same time demand from emerging economies like China and India has been strong.

Abbassian but downplayed concern that rising food prices could cause fresh problems as happened two years ago when the price of grain is largely the cause of the problem, with a dramatic increase in oil prices. He noted that another rise in oil prices - currently about $ 95 a barrel - could exacerbate the problem. While increases in oil prices, and forecasts are proposing could reach $ 100, it is still well below the peak of $ 145 reached in July 2008 on a wave of acquisitions by international speculators.

Index of FAO food hit 215 points last month, against 206 in November, breaking the 213.5 recorded in June 2008. It shows a dramatic increase in food prices in a decade. In 2000, the index stood at 90 and not cross the 100 until 2004.

Economists are wary of inflation peaks in the world can rise interest rates in developed countries are at historically low due to the banking crisis.

Julian Jessop, chief international economist at Capital Economics, said: "Inflationary pressures this year, the recent surge in the cost of agricultural commodities is much higher than the pick-up in oil prices."

Jessop said the price of oil is increasing, largely because of demand caused by the rebound of industries worldwide. "Instead, the increase in agricultural food prices is largely due to supply shocks such as drought in major wheat producing countries. These are exacerbated by speculative pressures."