Main reason for increase in vegetable /food prices is due to online trading of commodities,which goes on unchecked,farmland operations by corporations,shrinking area for food production(land is being sold for real estate) ,hoarding and bottle necks in idstiribution.
Unless these issues are addressed in time , situation could become worse and the government shall be a mute spectator.
Look at Indian Agriculture Ministerwho says he could not help it and Finance Minister who requests(?!) traders to release stocks and the sluggishness of the bureaucrats who let 200 tons of Onions imported from Pakistan rot in Mumbai port!
Story:
Last month, global food prices surpassed their mid-2008 records, according to a report out from the United Nations Food and Agriculture Organization (FAO). The FAO’s food price index clocked in at 214.7 in December, up 4.2% in just a month, and breaking the previous record of 213.5 in June 2008.
“It will be foolish to assume this is the peak,” says FAO senior economist Abdolreza Abbassian. He calls the situation “alarming,” but dutiful bureaucrat that he is, he won’t call it a “crisis.”
Last month, global food prices surpassed their mid-2008 records, according to a report out from the United Nations Food and Agriculture Organization (FAO). The FAO’s food price index clocked in at 214.7 in December, up 4.2% in just a month, and breaking the previous record of 213.5 in June 2008.
“It will be foolish to assume this is the peak,” says FAO senior economist Abdolreza Abbassian. He calls the situation “alarming,” but dutiful bureaucrat that he is, he won’t call it a “crisis.” Heck, even the Super Big Gulp ain’t what it used to be: Now with 9% less!
Related:
– Record food prices will hit the world’s poorest hardest, raising the risk of riots, export bans, foreign-owned farmland expropriation and further price spikes fuelled by short-term investors……..
So far, experts say weather-related supply shocks — floods in Australia, drought in Argentina, dry weather and fires in Russia and potentially crop damaging frosts in Europe and North America — were largely to blame. But they worry politics and markets could soon take over to produce a vicious circle.
“The danger is that what happens now is that you get a second shock as countries can respond by imposing export bans and financial markets investors pile in for short-term investment, pushing prices much higher, as they did in 2008,” said Maximo Torero, divisional director for markets, trade and institutions at Washington DC’s International Food Policy Research Institute (IFPRI).
Russia imposed export restrictions last year after fires and drought. In 2008, IFPRI says at least 13 countries including Argentina, Cambodia, Kazakhstan, China, Ethiopian, Malaysia and Zambia imposed either export bans or taxes, further squeezing supply.
“Clearly what is needed is to increase production through appropriate investment in agriculture, to increase the information on stocks around the world, strengthen the regulation of the futures markets and to have safety net mechanisms to protect the poorest consumers,” he said.
Political risk insurers, who provide protection against dangers such as confiscation or political violence, are watching closely — although they say there has not yet been any direct impact on premiums.
“The potential is there for food riots and also for governments to take action such as embargos on food exports or nationalisation of assets involved in food production or storage in order to protect their people — not always necessarily for the sake of altruism but often to preserve their position as governments in office,” said a senior underwriter in the London political risk insurance market.
The highest risks of farmland expropriation remain in Latin America, insurers say — particularly Venezuela, Bolivia and Ecuador — but this is more down to local political factors than rising prices. The greatest impact of the recent rally could be on land deals in Africa, some suggest.
RISK MITIGATION STRATEGIES
The 2008 spike produced a flurry of interest in farmland purchases both from Western funds and richer emerging countries such as China and Gulf states keen to preserve their supplies.
While some deals fell through after the crash, others are now entering production. But they have proved controversial. Local anger over the purchase of Madagascan farmland by South Korean firm Daewoo was seen by some as a contributing factor in the island’s 2009 coup.
“The main risks will come where they are in an area where the population is short of food themselves and the deal is seen as being in some way inappropriately negotiated,” said Jonathan Wood, global issues analyst at Control Risks. “So many of these projects are in East Africa: Ethiopia, Kenya, Tanzania. But a lot will depend on the individual deal.”
Some investors such as London-based funds Emergent Asset Management and Chayton Capital say a key part of their strategy has been to ensure such projects clearly benefit the local community, for example through local milling.
“Smart investors don’t own the land,” said Bond at the World Bank‘s MIGA. “They work with contract farmers and see the domestic market as their first and most important market. It makes sense from a risk mitigation strategy’
http://in.reuters.com/article/idINIndia-53968020110106?pageNumber=2
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