World Bank Chief Warns on High Food Prices

Sources:
Guardian: Food Price Rises Pushing Millions Into Extreme Poverty, World Bank Warns
FT: World Bank Chief Warns on Food Threat
WSJ: World Bank: Rising Food Prices Pose Imminent Threat

Over the past year, the world has seen a rapid increase in food prices. The head of the World Bank, Robert Zoellick, recently warned that if this food inflation continues, it could have tragic consequences for much of the developing world and could lead to the impoverishment of millions of people.

The cost of food, as measured by the World Bank’s global food price index, has increased by 36% over the past year, which is one of the largest year-over-year increases in food costs in recent history. Bad weather has been the primary cause for the price increases, as it has caused supply shortages in staples such as corn, wheat, and soybeans. Exacerbating the increase in food prices has been rising energy costs, especially increasing oil costs, which make it more expensive to transport food products.

The effect of these increased food prices has been harsh, especially for people living in poorer countries, where an increasing portion of their small income must now be used to purchase food, leaving little money to pay for other necessities. According to Zoellick, an estimated 44 million were driven into poverty in the last year because of higher food prices. Zoellick warned that if the food prices continue to increase, it could be disastrous for the world’s poor. According to World Bank estimates, if food prices increase another 30%, 34 million more people will be driven into poverty. Indeed, Zoellick went so far as to cite the hardship caused by food inflation as one of the main reasons for the political unrest in North Africa and the Middle East.

To combat the threat of food inflation, Zoellick is hopeful food-producing nations around the world will take steps to mitigate price increases. Specifically, Zoellick encouraged nations to stop using export controls on agricultural products. Countries, such as Russia and the Ukraine, have recently imposed exports bans on wheat to keep their domestic supplies high, thereby relieving upward pressure on wheat prices. By imposing such bans, however, countries deprive the rest of the world of much needed food supplies, which leads those other countries to confront higher food prices.