Davos: Officials meeting at the World Economic Forum (WEF) expressed concern on Thursday about soaring food prices stoking social unrest, but corporate figures rejected calls for curbs on speculation. “Higher food prices and volatility are one of the biggest threats to the global economic recovery and social stability,” Ngozi Okonjo-Iweala, managing director at the World Bank, told Reuters on the sidelines of the meeting in the Swiss resort.
US wheat futures rose to a new 29-month high on Thursday as buyers scrambled for supplies amid harsh weather in major producing countries like Australia and Russia.
Street protests in Egypt -- in part stoked by surging prices -- continued into a third day on Thursday following unrest in Algeria and in Tunisia, where President Zine al-Abidine Ben Ali was deposed earlier this month.
“There’s no doubt higher food prices and a stress in living standards are taking a toll,” said Okonjo-Iweala, a former Nigerian finance minister.
“This will hit the poor the hardest. We’re not going to see cheap food prices again because this is a long term phenomenon ... We need more investment in Africa because more than 50% of arable land in the world today is in Africa.”
French President Nicolas Sarkozy, who will address delegates at the annual WEF meeting later on Thursday, has called for new rules to curb commodity price volatility, warning that the world risks food riots and weaker growth if leaders fail to act.
Mexican finance minister Ernesto Cordero said he feared emerging markets would be hit by rising inflation in the same way as in 2008, when food prices also jumped.
“The world should be paying attention to food inflation in a more integral way,” he told Reuters. “It’s not just about speculation in the market, but also about shocks in demand, increasing shocks in supply.”
Nils Andersen, chief executive of Danish shipping and oil group A.P. Moller-Maersk, said banning speculation was not the answer.
“It is hard to regulate commodities prices,” he told Reuters Insider. “If people perceive there is a lack of raw material or commodities or the prices are too low, they will try to accumulate them, which will press the prices further up.
“You can say that if it is done by speculators, it is unfortunate. But it can also be done by governments trying to secure food supplies for their population. And it is really hard to criticize that.”
Patrick Davies, chief executive of the South African oil-from-coal company Sasol’s, agreed.
“I understand concerns particularly with regards to food prices, the idea to curb them to combat poverty. But we shall think about other ways before we go for strict regulations of commodity prices,” he told Reuters.
Okongo-Iweala said a certain amount of regulation oversight is needed, especially in the key commodity markets.
“But we have to be careful about overregulation. We need some regulation but not a heavy hand. We need to develop commodity markets in key areas such as in Africa that will enable farmers to plan for the future,” she told Reuters.
She added that Africa had around half of the world’s arable land and more investment is necessary. The World Bank has identified a $31 billion shortfall in the continent’s infrastructure funding requirements.