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Rising food prices push 44 million into poverty: World Bank

A man buys vegetables from a store at a market in Beijing, China Tuesday, Feb. 15, 2011. A jump in food prices pushed China's inflation higher in January, adding to pressure on Beijing to control surging living costs.

Andy Wong/AP/Andy Wong/AP

The World Bank is warning that global food prices have hit dangerous levels, particularly in poor countries where the prices of many key staples have jumped by more than 50 per cent in six months.

"It is already clear recent price rises for food are causing pain and suffering to poor people around the globe," the bank's president, Robert Zoellick, told reporters Tuesday. He added that bank officials are worried food inflation could prompt more protests similar to those in Egypt and Tunisia.

"I'm concerned that higher food prices add to stress points and could add to the fragility that is already there any time you have revolutions and transitions," Mr. Zoellick said.

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His comments came as the bank released a quarterly report showing its food price index has increased by 29 per cent in the past year and is close to the peak reached in 2008, when soaring food prices sparked protests in dozens of countries. Earlier this month, the United Nations Food and Agriculture Organization said its food price index had surpassed levels reached in 2008.

The World Bank takes a different approach to monitoring food prices than the FAO. The UN agency tends to follow global price changes, such as moves on commodity markets, whereas the World Bank focuses on local prices. It also measures the importance of each commodity to the diet of people in that country.

"What we know, based on a lot of research that's been done, is that global and local prices often can go in very different directions," said Hassan Zaman, a bank economist who authored the quarterly report.

For example, the report said that between June and December of 2010, wheat prices increased 54 per cent in Kyrgyzstan and 45 per cent in Bangladesh. The increase mattered more to people in Kyrgyzstan because wheat makes up 40 per cent of their diet, whereas it accounts for just 6 per cent of the diet in Bangladesh, where rice is more important. By contrast, the price of wheat on the Chicago Board of Trade increased by 75 per cent during that time.

The price of rice increased 17 per cent globally during the same period, according to the report. But it was up 19 per cent in both Bangladesh and Indonesia, where rice makes up 70 per cent and 50 per cent of diets respectively.

The report found that local prices for some commodities have actually declined in parts of Africa, thanks to decent domestic harvests. For example, the price of corn nearly doubled on the Chicago Board of Trade in the past year, but fell by 8 per cent in Kenya and Ethiopia, where corn makes up roughly 20 per cent of the local diet.

Mr. Zaman cautioned that the overall picture is still worrying because prices for most key commodities increased sharply in poor countries. Beans are a critical food in Burundi and the price jumped 48 per cent. Wheat is up by more than 30 per cent in Tajikistan, Mongolia and Sri Lanka, where it makes up a substantial part of the diet in each country. And the price of rice has climbed 46 per cent in Vietnam where it accounts for 59 per cent of the diet.

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Domestic prices in many countries don't reflect commodity markets, in part because of government food subsidies, local harvests and competition among producers. Rising food prices have already forced some governments to spend more on food subsidies, leaving national finances stretched.

By comparison, food inflation in Canada is running at about 1.7 per cent.

Even in countries where prices have declined in the past six months, "there are parts of those countries which have very large numbers of poor people who still struggle to meet their basic needs, including buying food," Mr. Zaman said. "We still need to be very worried about the chronically food-insecure people who live there and there are many millions who do."

Over all, the bank found that recent food price hikes benefited 24 million people in poor countries, mainly farmers who received more for their crops. However, rising prices pushed 68 million people below the bank's extreme poverty line, defined as someone living on $1.25 (U.S.) a day. The result is a net increase of 44 million people living in dire poverty because of food inflation, the bank found. That represents about a 3- per-cent increase in the total number of people living in extreme poverty, which the bank calculates at about 1.2 billion.

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