9 May 2008
Windhoek — Global inventories for maize and wheat are at historic lows. Of the 36 countries vulnerable to food prices, 21 are in Africa, said DBN Portfolio Manager: Research, Michael Humavindu.
The crisis necessitates a coherent and considered response by governments and agencies tasked with development, he said. Multiple crises are manifesting themselves simultaneously in property, credit, banking, food and commodities, he added.
The global food crisis is proving to be particularly severe on developing countries. Food prices have risen rapidly since the last quarter of 2007, blamed in varying degrees on rising populations, the use of bio-fuels to combat climate change, higher demand from developing countries, natural disasters and higher fuel prices.
Global food prices have risen by 75% since 2000, while wheat prices have increased by 200%. Similarly, the cost of other staples like rice, soya beans and corn has also hit record highs.
The increasing cost of grains is also pushing up the price of meat, poultry, eggs and dairy products.
As a consequence, protests against high food prices occurred in Mexico, West Bengal, Senegal, Mauritania and other parts of Africa.
Expert predictions are that prices will continue their relentless rise. The main reason is that traditional valuation models of food commodities are changing.
Traditionally, economists used variables like population growth, the wealth effect (developing countries getting richer and consuming higher quality foodstuffs) and the weather to explain the supply and demand side of food commodities. However, a new set of variables is being introduced as food is also now being priced as an energy source.
Food commodities are no longer only personal fuel, but also transportation fuel. As a result, food commodities are experiencing a confluence of demand and supply drivers, leading to an upsurge in prices.
On the supply side, global inventories of corn and wheat are at historic lows. The world needs at least two years of normal crop years, without any adverse weather effects to normalise stock levels again.
Commodities traders believe that the food price still needs to rise sufficiently to warrant major reinvestment in infrastructure and the cultivation of new land in order to boost supply before prices begin to abate.
"The crisis will not disappear overnight and necessitates far-reaching changes by all across the globe," said Humavindu.
Be the first to Write a Comment!
Copyright © 2008 Namibia Economist. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
