World Food Crisis

With all the financial crisis going one all over the  world, I don't know how many people aware of the world food crisis is just as bad if not any worse.  We may have complained or heard mom and grandma complained the soaring prices in the grocery store.  It's not the grocery stores get greedy; it's because the shortage of food and the uncertainty of the future outcome drive the prices higher and higher.  Reducing market uncertainty may not be among the fastest remedies for loweringthe number of hungry. Yet, letting international markets continue in their presentstate, volatile and unpredictable, will only aggravate an already grim outlook for worldfood security.

Even though the demand has been weakening, agricultural commodity market conditions still remain fairly tight, which is the major factor underpinning prices. Strong underlying demand in certain countries,where economic growth is robust, is price supportive. Aside from being high, mostprices are also extremely volatile, moving in tandem with unstable financial and equitymarkets. Fluctuations in exchange rates and uncertainties in energy markets are alsocontributing to sharp price swings in agricultural markets.

Given all these uncertainties, it is difficult to tell how markets will evolve in the near future.   For most commodities, we may be optimistically predict that the prices would remain below their recent highs, but the general picture still points to firm markets well into next year.  For most food commodities, next year’s production will have to increase in order to meet the expected demand. However, if this demand were to rise faster than currently envisaged, which is a possibility even assuming a slow economic recovery, then a more significant production expansion will be required. The question therefore is: do the current market signals convey the correct information for producers to adjust their production plans for next year? More critically, will there be enough time for an adequate production response in the event of an unexpected surge in demand? Input costs, from fertilizers to energy, remain high, interest rates have climbed in many emerging economies, all of which could dampen production next year and, hence, draw down stocks and boost prices further.