Now It’s the $6 Loaf of Bread

Quote: From the crowded warrens of Krus na Ligas to the aisles of the Wal-Mart in Las Cruces, N.M., the price of food has become an unavoidable topic of conversation. In January, the bull run of agricultural commodities was an afterthought at the World Economic Forum in Davos, where the subprime crisis, sovereign-wealth funds and the seemingly inexorable rise of petroleum dominated the agenda. But in a few short months, food has replaced oil as the Next Big Threat to the long-running global expansion. In the past year, wheat and corn futures have risen 61 percent and 58 percent, respectively. Rice futures have more than doubled since last August.
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In the recent global boom—five years of synchronous growth that lifted hundreds of millions out of poverty, forged new trading links and brought the hope of a better life to the developing world—the availability of plentiful, cheap food was generally taken for granted. But now much of the recent progress is being threatened by expensive food, whose advent has been a long time coming. As with oil, the rising prices are fueled in part by speculators. And like oil, expensive staples are swiftly upsetting business plans, sparking inflation, causing political instability and inflicting widespread economic pain.
The United Nations' World Food Program says that hunger has reached a crisis level in all the 121 poorest countries it has recently surveyed. High food prices are "creating a silent tsunami threatening to plunge more than 100 million people on every continent into hunger," said WFP executive director Josette Sheeran in London. The tsunami is no longer so silent. Food-related protests have erupted in Cameroon and Egypt. In Haiti, where the desperately hungry have turned to mud pies (concoctions of cooking oil, bits of vegetable and dirt), riots over food toppled the government of President René Préval.
The reasons behind the price spiral are at once complicated and simple. Although grain harvests in 2007 were the largest in the world's history, unfavorable weather has caused crop failures in Ukraine, a big grain producer, and wiped out Australia's once vast rice production. The rising price of energy, which has jacked up the costs of farming (a great deal of fertilizer is made from petroleum), is also a factor. And so, too, is speculation, as momentum investors have piled into the commodity markets. But at root, the rising prices have been fueled mostly by a long-term, steady increase in demand. To put it simply, in recent years people in developing countries, particularly India and China, have been eating more—and eating better—than ever before. In China, the boom has led to vastly greater consumption of meat and dairy products. Grains are the biggest single cost in raising pigs and cows.

http://www.newsweek.com/id/134311

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