UN warns that food prices could increase by 20%

The United Nations is warning of food price increases of 10 to 20 percent next year. The UN says that there were poor harvests this year for about every grain type except for rice. They also cite an unexpected drop in world stockpiles as another reason for the possible price increases.

From the Guardian, writer John Vidal tells us more about the food price warning.

"Countries must remain vigilant against supply shocks," the report warned. "Consumers may have little choice but to pay higher prices for their food. The size of next year's harvest becomes increasingly critical. For stocks to be replenished and prices to return to more normal levels, large production expansions are needed in 2011."

Prices of wheat, maize and many other foods traded internationally have risen by up to 40% in just a few months. Sugar, butter and cassava prices are at 30-year highs, and meat and fish are both significantly more expensive than last year.

Food price inflation – fuelled by price speculation, the searing heatwave in Russia in the summer and heavy trading on futures markets – is now running at up to 15% a year in some countries. According to the UN, international food import bills could pass the $1tn mark, with prices in most commodities up sharply from 2009.

Extreme volatility in the world markets has taken the UN by surprise and forced it to reassess its forecasts for next year. "Rarely have markets exhibited this level of uncertainty and sudden turns in such a brief period of time. World cereal production this year, which is currently put at 2,216m tonnes, is 2% below 2009 levels, 63m tonnes less than the forecast reported in June," said the authors.

"Contrary to earlier predictions, world cereal production is now forecast to contract by 2% rather than to expand by 1.2%, as anticipated in June," they said.