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February 28,2008
The World's Growing Food-Price Crisis
For the world's poorest people, the price rises are already proving devastating, since the speed at which prices have risen has wrought havoc on government relief programs.

Soaring prices of staples which have risen about 75% since 2005, driven by growing demand, rising oil prices and the effects of global warming have sparked riots in several countries, as people reel from sticker shock and governments scramble to feed their people. Crowds tore through three cities in the West African nation of Burkina Faso late last week, burning government buildings and looting stores; when officials tried to talk peace with one group of protesters, the enraged crowd hurled stones at them. The riots followed similar violent protests over food prices in Senegal and Mauritania earlier this year. And, last October, protesters in India burned hundreds of food-ration stores in West Bengal after stockpiles emptied, leaving thousands of people unfed.

Governments might succeed in quashing the protests, but lowering food prices could be far tougher and will likely take years, according to analysts who track global food consumption. The Washington-based International Food Policy Research Institute, or IFPRI, said last December that high prices are unlikely to fall soon, partly because world food stocks are being squeezed by soaring demand. The wild ride in agricultural markets has attracted intense speculation among investors, with billions of dollars being poured into commodities markets. On Monday, the price of wheat shot up about 25% on the Chicago Board of Trade, after officials in Khazakstan announced plans to restrict exports of their giant wheat crop in order to ensure the food supply to their own citizens. Russian officials have also said they are planning to restrict grain exports.

For the world~s poorest people, the price rises are already proving devastating, since the speed at which prices have risen has wrought havoc on government relief programs. Earlier this month, a top official at the U.S. Agency for International Development admitted that in order to meet current targets, it had been forced to skim off funds from future food-aid programs, worth about $120 million.

The problem is exacerbated by the fact that millions more people who were previously earning enough to feed their families can now no longer afford the food in their local stores, and are now swelling the ranks of those expecting relief from aid organizations. "We are seeing a new face of hunger," the executive director of U.N.~s World Food Program, Josette Sheeran, told TIME on Tuesday. "People who were not in the urgent category are now moving into that category." The organization currently feeds about 73 million people, including millions who get by on just 50 cents a day. After hosting a series of emergency meetings with international organizations and food experts this month at WFP~s Rome headquarters, Sheeran said the organization has concluded that food prices will remain high for years. She announced on Monday that the organization might have to cut its relief programs unless it raises an extra $500 million this year. "There is no way we can absorb a 25% price rise in one day and the volatility of the markets," Sheeran said.

One factor driving up the cost of food is the rocketing price of oil, which raises agricultural costs of everything from fertilizer to transport and shipping. Like the oil price, the cost of food is responding, in part, to the burgeoning demand in China and India, where rising incomes allow people to eat bigger meals, and to buy meat far more frequently. That, in turn, has helped to squeeze the world~s supply of grain, since it takes about six pounds of animal feed to produce a pound of meat.

Then there is climate change: Harvests have been seriously disrupted by freak weather, including prolonged droughts in Australia and southern Africa, floods in West Africa, and deep frost in China and Europe. And the push to produce biofuels to replace hydrocarbons is also adding to the pressure on food supplies generous U.S. subsidies for ethanol has gobbled up needed food acreage, as farmers switch from producing food. "The area used for biofuels is increasing each year," says Nik Bienkowski, head of research at ETF Securities, a commodities trading firm in London.

The food price rises are not bad news for everyone, says Bienkowski, who estimates that his company took in about $2 billion worth of investments last year. And millions of farmers whose income has languished through years of cheap food are now earning well.

"U.S. and British farmers are laughing all the way to the bank," says Simon Maxwell, director of the London-based Overseas Development Institute, an independent think tank. "And some poor people will get jobs on farms or in local communities." Yet those people will need to buy food, whose prices are rising far faster than wages. With relief agencies struggling to feed the hungry and the shelves in Pakistan, Burkina Faso, Senegal and many other countries in the developing world stocked with food many locals can no longer afford, the prospects for chaos are steadily growing.

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