A sharp increase in food prices over the past couple of years, intensifying in early 2008, has raised serious concerns about food and nutrition formany poor people in developing countries. The key affected areas are Asia, sub-SaharanAfrica andCentralAmerica. There are also related concerns about inflation, and – in some countries – about civil unrest. The current situation is distinctive because it is not just a select few but nearly allmajor food and feed commodities that are seeing a ‘concurrence of the hike in world prices’. Real prices are higher than they have been since the 1974 price spike.When adjusted for inflation and the recent decline of the dollar, the foodprice increases are smaller but still dramatic, carrying serious consequences for the purchasing power of the poor.

Dramatic increases in international agricultural commodity prices began in 2006 and peaked in July 2008. An equally remarkable and rapid decline of those prices then ensued, accompanied by extreme volatility in those prices. The trend in food prices lagged the rapid increases in other commodity prices,with rice among themost expensive at the peak and rising as much as crude oil.High commodity prices quickly raised farmgate prices in developed countries. In developing countries, poormarket integration and border barriersmay have limited pass-through of these prices to the farmgate, but therewasmore rapid food price and general inflation than occurred in many developed countries. Countrieswere impacted to differing extents, and food riots occurred in the most affected cases. In response to the crisis, countries from India and Egypt to Vietnam and Indonesia banned exports of rice, a staple for half theworld.World food prices rose to a record in December on higher sugar, grain and oilseed costs, the United Nations said.An index of 55 food commodities tracked by the Food andAgricultureOrganization gained for a sixthmonth to 214.7 points, above the previous all-time high of 213.5 in June 2008, the Rome-based UN agency said in amonthly report.

Moreover, debate persists on the exogenous mechanisms driving these changes,which are often interrelated (e.g.,worldwide economic boomand then global recession, speculation in commodities). The goal will be to identify factors likely to drive commodity prices in the future and to provide some understanding of the dynamics and persistence of the observed global price changes. There is an emerging and reasonable consensus among experts and academics about the range of causes.However, debate is ongoing about the relative contribution of these causes. There is certainly no one, single cause; rather, many factors are interacting in different, locally specificways. Causes vary between different places and over time, as has happened in previous commodity booms. Some are cyclical, some are structural and some are unique The cost of food climbed 25 percent froma year earlier in December, based on the FAO figures.The agency’s food-price indicator rose from206 points inNovember. Record fuel prices, weather- related crop problems, increasing demand fromthe growing Indian and Chinese middle classes, and the push to grow corn for ethanol fuel all contributed to the crisis that year. Global food production will have to rise 70 percent by 2050 as the world population expands to 9.1 billion people from about 6.8 billion people in 2010, the FAO has said.

Main factors responsible for the recent rises in food prices:-

• Weather disruptions, including serious droughts, have affected output in several key producing countries (Australia, Turkey, Ukraine and parts of North America) in the mid-2000s. This has led to two successive years of negative growth inworld cereal production.

• Under-investment in rural infrastructure and agricultural innovation.

• Increased demand due to use of food crops in biofuel production has resulted in reduced soybeanandwheat cultivation.

• World production of cereals has slowed, causing a decline in stocks over the last decade. This hasweakened the ability of theworld food systemto copewith shocks and created conditions in which short-term shocks cause large price increases (Wiggins, 2008).High cost of oil and energy is affecting transportation of agricultural inputs and outputs,mechanical cultivation, fertilisers and pesticides.

• Increasing and changing demand in China and India, due to economic growth, has led to increased consumer purchasing power and consequent shifts away fromtraditional staples and toward higher-value foods like meat and milk. However, some analysts believe that the effect of this onworld prices has been
  exaggerated.

• Topsoil erosion: modern ploughing, overgrazing, fertiliser and pesticide use result in the steady depletion of worldwide topsoil. Water and winds carry away the soil,when it is not fixed by plant cover. An estimated 25 billion tons of topsoil are lost to erosion each year. The UN estimates that erosion has now seriously degraded about 40 per cent of the world’s agricultural land.

• Increasing urbanisation often means that more people are becoming purchasers rather than producers of food.

Food in Figures:

• 93,000,000 Acres of corn planted by US farmers last year, up 19 per cent on 2006.
• 76% Amount of US corn used for animal feed.
• 8kg Amount of grain it takes to produce 1kg of beef.
• 20% Portion of US corn used to produce five billion gallons of ethanol in 2006-07.
• 50kg Quantity of meat consumed annually by the average Chinese person, up from20kg in 1985.
• 10% Anticipated share of biofuels used for transport in the EU by 2020.
• $500m The UNWorld Food Programme's shortfall this year, in attempting to feed 89million needy people.
• 9.2bn The world's predicted population by 2050. It's 6.6bn now.
• 130% The rise in the cost of wheat in 12months.
• 16 times The overall food consumption of the world's richest 20 per cent comparedwith that of the poorest 20 per cent.
• 58%Jump in the price of pork in China in the past year.

• $900 The cost of one tonne of Thai premier rice, up 30 per cent in amonth. It has been argued that by 2030 therewill be 600millionmore chronically under- ourished people in the.

world due to continued pressure on prices, in part due to the conversion of maize away from food uses to ethanol production. Demand for agricultural commodities – food, feed, and fuel – is likely to continue to escalate.Climate change and rising energy demand could re-accelerate food prices in the future. Ad-hoc market and trade policies such as export bans and import subsidies add further volatility in the international foodmarket.

Higher food prices can have radically different effects across countries and population groups. A recent IFPRI report provides a conceptual framework for understanding these impacts, which powerfully highlights the complexity of cause and effect. Broadly speaking, at the country level, net food exporterswill benefit from improved terms of trade, although the benefitsmay be offset in situationswhere exports are being banned to protect consumers.Net food-importing nations, however,will struggle tomeet domestic food demand.

An FAO report published in June 2008 highlights twenty two developing countries that are especially vulnerable due to a combination of high levels of chronic hunger (more than 30 per cent under- nourishment), and high dependence on imports of petroleumproducts (100 per cent inmost countries) and, inmany cases, also ofmajor grains (rice, wheat andmaize) for domestic consumption. Food-price increases are having serious consequences for the purchasing power of the poor. Affected groups include the rural landless, pastoralists, small-scale farmers and the urban poor.Despite the various causes of food crises, the hardships that individuals and communities face have striking similarities across disparate groups and settings.

These include:

• Inability to afford food, and related lack of adequate caloric intake
• Distress sales of productive assets
• Migration of householdmembers in search ofwork
• Reduced household spending on healthcare, education and other necessities.

The rise in global commodity prices is fueling inflation everywhere particularly in developing countries where food and energy forms amajor percentage of the inflation basket.This has forced countries like India and China to accelerate interest rate hikes to cool down inflation.Rising Food Prices has caused distress in a number of places leading to food riots in Africa and have been said to be a leading cause of the revolutions in theMiddle East.Oil Prices continues to increase unabated as dollar decreases with USMoney Printing.Commodities are touching new all time peaks as rising global demand,finite resources,money printing by developed countries fuel price hikes.Silver has been increasing in a parabolicmannerwith other commodities too showing heart-stopping jumps in prices.The rise in global wheat,rice prices has been at a record aswell.Almost all commodities have seen sharp prices increase.

Specific policies are needed to deal with the changing causes and consequences of high food prices, to help the most vulnerable people in the short term, while working to stabilise food prices by increasing agricultural production in the long term. A detailed set of policy prescriptions has been laid out in the Comprehensive Framework forAction (CFA), developed by the High Level Task Force on the Global Food Crisis. The CFA highlights two major objectives – meeting immediate needs, and building longer-term resilience – with related outcomes and actions.