Weather Causes Rise in Food Prices:Research Holds Promise

17 August 2012

By Kathryn McConnell | Staff Writer |

Washington — Weather problems in major agricultural areas of the United States, Russia and Brazil led to a 6 percent rise in global food prices in July after three months of decline. Prices remain volatile, according to the United Nations agency that tracks food prices.

The July increase was mostly driven by increases in grain and sugar prices, the U.N. Food and Agricultural Organization (FAO) reported. But, it said, prices do not yet match their 30-year high of mid-2008 that simultaneously came with an international economic downturn.

Maize prices in the United States rose by almost 23 percent in July as a result of the worst U.S. drought since the 1950s. Wheat prices rose by nearly 19 percent in Russia due to drought. The increase in sugar prices was set off by rains in Brazil that hampered sugarcane harvests. Brazil is the world’s largest sugar exporter.

Meat, dairy and oil prices remained stable but could increase later in 2012, said U.S. Agriculture Secretary Tom Vilsack. A portion of the U.S. maize crop is used in cattle feed.

Officials from the United States, Mexico and France will hold a conference call in late August to discuss whether the Group of 20 (G20) needs an emergency meeting on the global food supply. The G20 represents the world’s 20 largest economies that account for 60 percent of the world’s population and 80 percent of global trade.

The G20 worries that the drought will lead some countries to take drastic measures to keep the prices of grains from rising, like placing embargoes on their food exports.

With a growing global population and higher incomes, and with farmland area expected to expand only minimally, increased demands for food will need to be met with increased productivity, according to the latest Agricultural Outlook Report from FAO and the Organisation for Economic Co-operation and Development.

At a meeting in June in Los Cabos, Mexico, G20 leaders launched an initiative aimed at encouraging increased investment in agricultural innovation

In the U.S. Midwest, known as the nation’s breadbasket, hope for improved future harvests lies in the now withering fields. Seed companies like Monsanto and Pioneer are testing new varieties of maize that withstand drought by helping stalks draw more water from soil.

Company researchers are joined by researchers at America’s agricultural universities who are emphasizing the development of crops that can withstand extreme weather changes.

Some scientists predict that drought may become more frequent in North America.

FAO’s Food Price Index is a measure of the monthly change in international prices of cereals; oils and fats; beef, poultry and pork; dairy; and sugar.