El Nino would push global food prices even higher, warns World Bank

Global food prices that jumped in July may extend gains if an El Nino weather pattern develops or if importers begin hoarding supplies, the World Bank said.

The World Bank’s Food Price Index rose 10% in July, after falling in the two previous months, according to an Aug 30 report that weighs US dollar prices of several commodities.

Wheat and corn costs were up 25% each, while sugar rose 12% and soybean oil climbed 5%.

Corn and soybeans surged to records last month on the Chicago Board of Trade, surpassing previous all-time highs set in 2008, as the worst midwest drought in more than 50 years damaged crops.

Milling wheat prices have jumped 35% this year on NYSE Liffe in Paris following dry weather in Russia and eastern Europe. The US State Department estimates surging food prices triggered more than 60 riots worldwide from 2007 to 2009.

“World Bank experts do not currently foresee a repeat of 2008,” according to the report.

“However negative factors — such as exporters pursuing panic policies, a severe El Nino, disappointing Southern Hemisphere crops, or strong increases in energy prices — could cause significant further grain price hikes such as those experienced four years ago.”

El Nino, a warming of waters in the Pacific Ocean, affects weather patterns worldwide.

It can bring dry conditions to parts of Australia, Indonesia and southeastern Africa, and excess rains to areas of South America, according to the US National Weather Service.

Countries in the Middle East, north Africa and sub-Saharan Africa are the “most vulnerable” to rising food prices because they are reliant on imports and food makes up a large portion of average household incomes, the World Bank said.

The World Bank spent more than $9bn (€7.13bn) on agricultural support programmes during the 2012 fiscal year that ended on Jun 30, the highest in two decades.

Bloomberg