"From McDonald's burgers in the US to sugar in Bolivia and chillies in Indonesia, food prices across the globe are soaring"
"A "perfect storm" of bad weather, rapid growth in emerging economies and low interest rates has sent prices for a broad range of farm and non-farm commodities climbing often at double-digit rates: from wheat to corn, cotton to rubber, and oil to boot"
"Not only is there a risk, but there have already been riots in some parts of the world because of rising prices"
"The government’s move to allocate RM6 billion to procure a second batch of six offshore patrol vessels (OPV) has led to concerns over Malaysia’s defence strategy and spending"
This is not such good news to start the year of the rabbit:
Higher food prices here to stay, say analysts
Published: 2011/02/07
WASHINGTON: From McDonald's burgers in the US to sugar in Bolivia and chillies in Indonesia, food prices across the globe are soaring.
But consumers and governments should brace themselves for even higher prices, experts warn, as demand in populous emerging economies will put pressure on supplies for years to come.
A "perfect storm" of bad weather, rapid growth in emerging economies and low interest rates has sent prices for a broad range of farm and non-farm commodities climbing often at double-digit rates: from wheat to corn, cotton to rubber, and oil to boot.
And while it resembles the sharp spike in food and oil prices of 2007-2008, analysts say the trend is less speculative in nature and not likely to end with a price collapse, as it did two years ago.
"Things were quite different in 2008... You had price spikes, it was a couple of food grains," said Chris Delgado, an agriculture specialist at the World Bank.
"What is going on now is more broadbased... It's not led by grains." And it's widespread, and feeding into political worries, not just in the Middle East.
In Indonesia, where even the price of chillies has soared, the government suspended import duties on key food items after inflation hit an annual rate of seven percent in January. In Bolivia, sugar is being rationed despite a 64 per cent price hike.
In the US, much higher meat prices are forcing restaurants from fancy steak houses to McDonald's to hike their prices, even though the pocketbooks of consumers remain tight.
On Thursday, the UN Food and Agriculture Organisation said food prices have reached their highest level since it began measuring them in 1990, and pointed to the political problems that can spark.
"Not only is there a risk, but there have already been riots in some parts of the world because of rising prices," FOA chief Jacques Diouf said.
There is little relief in sight, say experts. "I think commodity prices are going to be trending higher," said Gerard Lyons, chief economist for Standard Chartered Bank.
"What's interesting is that even commodities that aren't heavily traded are rising in price. ... That suggests this is fundamental, not speculators," he said.
The 2008 commodity spike was only a handful of food grains plus oil, and driven in large part by political decisions amounting to hoarding and heavy trader speculation.
This year the problem is more fundamental: prices are being driven by growing demand from huge emerging economies like China, India, Russia and Brazil that is unlikely to slacken until prices get much higher, say analysts.
The World Bank's Delgado said that supply shocks are exacerbating the price hikes: weather and policy moves that have cut grain supplies from Russia, Argentina and Australia, among others.
But the trend is rooted in the fundamentals of soaring demand, say economists.
Read more: Higher food prices here to stay, say analysts
Looks like the crisis in the Middle East partly due to spiraling food prices and unemployment will spread to other regions in the world, if Governments do not have plans in place to at least subsidize food prices while keeping unemployment rate from rising out of control, then they are in for some rough ride, very rough.
I think Malaysia would for now be sheltered from the upheaval as the unemployment rate is still low at about 3.4% (refer here). Our inflation rate is also low hovering at 2-3% (refer here)
The Malaysian government subsidizes and controls prices on a lot of essential items to keep the prices low. Prices of items such as palm oil cooking oil, petrol, flour, bread, rice and other essentials have been kept under market prices to keep cost of living low. The Government is still going steady with taking away subsidies, not too much nor too little. Thank you very much.
However, with the spiraling food cost the Government need to also reexamine spending in areas such as defense, the RM6 billion for the cost of OPVs is somewhat expensive, I think the DAP has got a point here as well.
While I would not like to question the need for military assets which are critical to the country's defense, but the ordinary tax payers must be comforted with the thought that all RM6 billion spent are value for money spent to procure military asset ONLY and not parts going to be paid as huge commissions to third parties as management fees etc. Don't kill the messenger OK, this is what many will be wanting to know and the Government needs to be transparent about this, people will ask especially if the Government moved to take away the subsidies on food further.
So is RM6 Billion money well spent for another six(6) of this:
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