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Impact of climate change on food prices is grossly underestimated

Maize: food prices have risen Climate change’s impact on future food prices is being underestimated, Oxfam warned in a report on Wednesday.

The development charity predicts that massive price spikes will be a devastating blow to the world’s poorest people who today spend up to 75% of their income on food, and will also adversely affect global consumers.

Its report, Extreme Weather, Extreme Price, suggests extreme weather events such as droughts and floods – made more likely by global warming – could drive up future food prices.

Previous research has tended to consider gradual impacts of rising global temperatures, such as changing rainfall patterns. Oxfam’s research, comissioned by the charity and undertaken by the Institute of Development Studies, examines the impact of extreme weather scenarios on food prices in 2030. It warns that by that date the world could be even more vulnerable to the kind of drought happening today in the US – the worst in 60 years – with dependence on US exports of wheat and maize predicted to rise and climate change increasing the likelihood of extreme droughts in North America.

The research claimed that:

  • Even under a conservative scenario another US drought in 2030 could raise the price of maize by as much as 140% over and above the average price of food in 2030, which is already likely to be double today’s prices.
  • Drought and flooding in southern Africa could increase the consumer price of maize and other coarse grains by as much as 120%. Price spikes of this magnitude today would mean the cost of a 25kg bag of corn meal – a staple which feeds poor families across Africa for about two weeks – would rocket from around $18 to $40.
  • A nationwide drought in India and extensive flooding across south-east Asia could see the world market price of rice increase by 22%. This could lead to domestic spikes of up to 43% on top of longer term price rises in rice importing countries of such as Nigeria, Africa’s most populous country.
  • Climate shocks in sub-Saharan Africa are likely to have an increasingly dramatic impact in 2030 as 95% of grains such as maize, millet and sorghum that are consumed in sub-Saharan Africa are expected to come from the region itself.

As well as affecting the world’s poorest, such rises will also hit those on the lowest incomes in the UK, who already spend up to half their household budget on food, the report notes.

Oxfam’s climate change policy adviser, Tim Gore, said: “Rising temperatures and changing rainfall patterns hold back crop production and cause steady price rises. But extreme weather events – like the current US drought – can wipe out entire harvests and trigger dramatic food price spikes. We will all feel the impact as prices spike but the poorest people will be hit hardest.”

He said the world needed to wake up to the drastic consequences facing our food system of climate inaction: “As [greenhouse gas] emissions continue to soar, extreme weather in the US and elsewhere provides a glimpse of our future food system in a warming world. Our planet is heading for average global warming of 2.5–5C this century. It is time to face up to what this means for hunger and malnutrition for millions of people on our planet.”

The report comes as UN talks aimed at tackling climate change are due to close in Bangkok on Wednesday with little sign of progress, while tomorrow the Food and Agriculture Organisation is due to publish further information on how the worst US drought in 60 years is impacting on global food prices.

View or Download the entire report

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Global food prices jumped 10% in July from the month before, driven up by the severe drought

Global food prices jumped 10% in July from the month before, driven up by the severe Midwest drought which has pushed the price of grains to record levels, the World Bank reported Thursday.

Global food prices soared by 10 percent in July from a month ago, with maize and soybean reaching all-time peaks due to an unprecedented summer of droughts and high temperatures in both the United States and Eastern Europe, according to the World Bank Group’s latest Food Price Watch report.

From June to July, maize and wheat rose by 25 percent each, soybeans by 17 percent, and only rice went down, by 4 percent.  Overall, the World Bank’s Food Price Index, which tracks the price of internationally traded food commodities, was 6 percent higher than in July of last year, and 1 percent over the previous peak of February 2011.

“Food prices rose again sharply threatening the health and well-being of millions of people,”said World Bank Group President Jim Yong Kim. “Africa and the Middle East are particularly vulnerable, but so are people in other countries where the prices of grains have gone up abruptly.”

Overall, food prices between April and July continued the volatile trend observed during the previous 12 months, which halted the sustained increases between mid-2010 and February 2011. Prices increased in April, came down in May and June, and sharply increased in July.

Sharp domestic price increases have continued in this quarter, especially in Africa. Sub-Saharan Africa, in particular, experienced the highest price increases in maize, including 113 percent in some markets in Mozambique. Meanwhile, the Sahel and eastern Africa regions experienced steep price increases of sorghum: 220 percent in South Sudan, and 180 percent in Sudan, for instance.

According to Food Price Watch, weather is the critical factor behind the abrupt global price increases in July. The drought in the U.S. has resulted in vast damages to the summer crops of maize and soybeans, for which the country is the world’s largest exporter. Meanwhile, the dry summer in the Russian Federation, Ukraine, and Kazakhstan has contributed to projected wheat production losses.

The abrupt food price increases turned favorable price prospects for the year upside down. World Bank experts do not currently foresee a repeat of 2008; however, negative factors — such as exporters pursuing panic policies, a severe El Nino, disappointing Southern hemisphere crops, or strong increases in energy prices — could cause significant further grain prices hikes such as those experienced four years ago.

Droughts have severe economic, poverty and nutritional effects. In Malawi, for instance, it is projected that future severe droughts observed once in 25 years could increase poverty by 17 percent, hitting especially hard rural poor communities. And in India, dismal losses from droughts occurred between 1970 and 2002 to have reduced 60-80 percent of households’ normal yearly incomes in the affected communities.

“We cannot allow these historic price hikes to turn into a lifetime of perils as families take their children out of school and eat less nutritious food to compensate for the high prices,”said Kim. “Countries must strengthen their targeted programs to ease the pressure on the most vulnerable population, and implement the right policies.”

“The World Bank has stepped up its support to agriculture to its highest level in 20 years, and will keep helping countries respond to the food price hikes,” continued Kim.

The World Bank’s support for agriculture in FY12 was over $9 billion—a level not reached in the past two decades.  The Bank is also coordinating with UN agencies through the High-Level Task Force on the Global Food Security Crisis and with non-governmental organizations, as well as supporting the Partnership for Agricultural Market Information System (AMIS) to improve food market transparency and to help governments make informed responses to global food price spikes.

Should the current situation escalate, the World Bank Group stands ready to go even further to assist client countries protect the most vulnerable against future shocks.  Measures can include increased agriculture and agriculture-related investment, policy advice, fast-track financing, support for safety nets, the multi-donor Global Agriculture and Food Security Program, and risk management products.

Programs and policies to help mitigate food price hikes include safety nets to ensure poor families can afford basic staples, sustained investments in agriculture, the introduction of drought-resistant crop varieties–which have provided large yield and production gains–and keeping international trade open to the export and import of food.

According to Food Price Watch, prices are expected to remain high and volatile in the long-run as a consequence of increasing supply uncertainties, higher demand from a growing population, and the low responsiveness of the food system.

 

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Rising Prices on the Menu

All around the world, poor weather has reduced harvests and driven up food prices, fueling inflation risks and hitting the most vulnerable. Floods in Australia, Pakistan, and parts of India have helped push up the cost of food, as have droughts in the US, China, Argentina, and Eastern Europe. Energy prices are again on the rise, with likely knock-on effects for food. Many countries, especially developing and emerging economies, are struggling with the implications of high food prices, given their effects on poverty, inflation, and,for importing countries, the balance of payments. Higher food prices may also have contributed to social unrest in the Middle East and North Africa.

An insightful article from the IMF website provides a good insight, click here to open the PDF

 
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Posted by on August 6, 2012 in Agriculture

 

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Food Prices Rise to Record on Commodity Gains

World food prices rose to a record in January on higher dairy, sugar and cereal costs and probably will remain elevated, the United Nations said.

An index of 55 food commodities climbed 3.4 percent from December to 231 points, the seventh straight increase, the UN’s Food and Agriculture Organization said in a report today. Dairy prices led advances among five food categories, rising 6.2 percent, the Rome-based agency said.

Food commodities extended gains last month after jumping in 2010 as drought and floods damaged crops from Russia to Argentina. Elevated food prices contributed to protests in Tunisia that ousted President Zine El Abidine Ben Ali last month and demonstrations in Egypt that prompted Hosni Mubarak to say this week he won’t seek re-election as president.

“The new figures clearly show that the upward pressure on world food prices is not abating,” Abdolreza Abbassian, senior economist at the FAO, said in a statement. “These high prices are likely to persist in the months to come.”

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