FAO sees January food prices close to record high

FAO sees January food prices close to record high

Milan: World food prices in January are expected to be close to record highs seen in December when they climbed above peaks which triggered riots in several countries in 2008, an economist at the United Nations’ food agency said.

“FAO’s expectation is that the January index would be very close or slightly below December," Abdolreza Abbassian, UN’s Food and Agriculture Organisation economist, said ahead of the release of FAO’s monthly food index.

The FAO’s Food Price Index (FPI), which measures monthly price changes for a food basket composed of cereals, oilseeds, dairy, meat and sugar, hit an all-time high of 214.7 points in December 2010, above a previous record set in June 2008 during the food crisis.

High food prices have come back into the spotlight after they fuelled protests in Tunisia that led to the fall of the president there earlier in January 2011 and have spilled over to Egypt.

World leaders at the World Economic Forum in Davos last week warned rising food prices risked stoking more unrest and even war. French President Nicolas Sarkozy reiterated calls for regulation to rein in speculation and volatility.

According to preliminary estimates, prices of sugar, some grains and oilseeds in January were slightly below levels seen in December, Abbassian said in a telephonic interview.

He said the FAO uses spot and physical prices to calculate the index and does not use futures prices which rallied in January.

US corn and soybean futures topped out at 2-1/2 year highs in January and wheat futures hit a 29-month high last Thursday as buyers scrambled for supplies amid harsh weather in major producing countries such as Australia and Russia.

Wheat futures on Euronext climbed in January to the highest level since March 2008, powered by increased export demand as fears of short supplies and social unrest prompted importers, especially from North Africa and Middle East, to build up inventories.

Raw sugar futures roared close to a fresh 30-year high last week as tight supplies and expectations of increased export to Russia encouraged market bulls.

The FAO is due to publish its FPI for January on 3 February.

The agency will revise the entire series of the index dating back to 1990 because of a change in calculating its meat component, but December 2010 and June 2008 will remain as two major food price index peaks, Abbassian said.