Knee-jerk reactions to food prices only make matters worse, warns the International Food Policy Research Institute, which cites a number of reasons why we are not seeing a repeat of the 2007/8 food price crisis.
Last month concerns were been raised over bread prices after Russia decided to temporarily ban wheat exports following drought that reduced production.
But Maximo Torero, director of the markets, trade, and institutions division at the IFPRI said early reflexive media reports caused another global price spike due to the panic they caused. He added that “more thoughtful analysis has followed in recent years”, but only after the worry had made the markets more jittery and set off protectionism.
In 2007/8, around a dozen countries stopped or restricted food commodities in a bid to protect their own domestic markets – but served only to push prices up further.
“Global market stability was sacrificed at the altar of domestic politics,” said Torero.
He listed seven differences between the 2007/8 situation and today’s however.
- Global wheat stocks are in better shape
- Bad weather has not hit all wheat producers
- The FAO food price index shows only a 1 per cent rise since January
- The prevailing trend is flat or slightly downward, and recent spikes are not prolonged
- The Chicago Board of Trade shows the same relative stability
- Production has not been affected for other key commodities such as maize, rice, barley rye and sorghum – and the price of oil is far lower.
Although the main concern is that rising food prices will have a devastating effect on the ability of the world’s poorest people to afford basic food staples, the food price picture is important for the global food industry.
Most firms requiring commodities as vital inputs conduct their own close monitoring to try to identify potential pressure points far enough in advance to take action.
When they are unable to do so, higher prices tend to be passed up through the food chain until they finally reach the retail level. However for the impact to be seen on the price of bread and other consumer goods, the higher prices would need to be sustained for some time.