Analysis: China's food prices to rise steadily in 2009(2)
In terms of the ratio of food inventory to utilization in the world in 2008, rice was 24.7 percent; wheat, 22.3 percent and coarse food grain, 16.4 percent. All of these fall below levels five years ago, according to a report by the Food and Agriculture Organization of the United Nations.
The global food storage volume in 2007 dropped to 309 million tons, for 54 days' consumption, comparing to the 115 days in 1999.
The rate between storage and consumption, an important gauge of food security, decreased to 19.2 percent in the period of 2007-2008, from the 20.7 percent in 2006-2007.
Thirdly, the depreciation of US dollars pushes up the prices of bulk commodities. The growth of food prices in 2008 partly attributed to currency's depreciation, which could continue into the near future.
Next, the prices of raw materials for farm production were also increased. The fall of international oil prices in the second half of 2008 was just a short lived phenomenon. The prices of energy and metals are estimated to bounce back in the long run.
Fifth of all, food production was cut by natural disasters, which are striking more frequently as the earth becomes warmer. The International Food Policy Research Institute found that the output of farm products would decline by 16 percentage points by 2020, especially in developing countries, as global warming intensifies.
Finally, an upgraded consumer structure and urbanization set higher food supply standards.
With economic progress, more people live in urban areas and are more inclined to consume food, such as meat, eggs, milk and processed food. Grains are more widely used to feed livestock and poultry, or to make high-end wine.
-- International food market in 2008
The world encountered a food crisis in 2008 when food prices in the first half climbed 45 percent. At this time, wheat prices in Chicago Mercantile Exchange soared 140 percent and paddy prices by 80 percent. The price hit 1,050 US dollars per ton for rice in May 2008, a 20-year high.
The climbing food prices threatened people's lives in many developing countries and in some places sparked protests and riots. And in the U.S. prices were swept away in panic, when some rice sellers had to set an upper limit on rice purchasing amounts.
In the second half of 2008, food prices began to decline as the financial crisis expanded to the whole world, and food supplies improved.
Speculation on stock, finance and energy futures markets sped food's depreciation. Rice prices ranged from 500 to 550 dollars per ton at the end of 2008, a retreat of 40 percent from May.
Meanwhile, energy prices weakened and many food prices atop.
Additionally, some countries planted more paddies, stimulated by the optimistic market in the first half of 2008. The rice output in 2008-2009 is predicted to hit 434.6 million tons, up 3.5 million tons year on year, according to the U.S. Department of Agriculture.
In the economic downturn, wheat demand could drop in developing countries, which consume half of the world's produced wheat.
The increasing supply and shrinking demand are important factors explaining the drop in food prices.
