12 / 104
12
2000
2002
2004
2006 2007
2008
Index reference: 1998-2000
Sugar
Dairy
Cereals
Oils and
Fats
Meat
FAO Commodity Price Indices
100
150
200
250
300
100
150
200
250
300
J F M A M J J A S O N D J F M A M J J A S O N D
While food prices generally declined in the past decades, for
some commodities, they have increased several fold since
2004, with the major surges in 2006–2008 (Brahmbhatt and
Christiaensen, 2008; FAO, 2008; World Bank, 2008). The
FAO index of food prices rose by 9% in 2006, 23% in 2007
and surged by 54% in 2008 (FAO 2008). Crude oil prices, af-
fecting the use of fertilizer, transportation and price of com-
modities (Figures 1 and 2), peaked at US$147/barrel in July
2008, declining thereafter to US$43 in December 2008 (World
Bank, 2008). In May 2008, prices of key cereals, such as Thai
medium grade rice, peaked at US$1,100 /tonne, nearly three-
fold those of the previous decade. Although they then declined
to US$730/tonne in September (FAO, 2008), they remained
near double the level of 2007 (FAO, 2008). Projections are
that prices will remain high at least through 2015. The cur-
rent and continuing food crisis may lead to increased inflation
by 5–10% (26–32% in some countries including Vietnam and
the Kyrgyz Republic) and reduced GDP by 0.5–1.0% in some
developing countries.
Among the diverse primary causes of the rise in food prices are
four major ones (Braun, 2007; Brahmbhatt and Christiaensen,
Figure 2: FAO food commodity price indices 2000-2008.
(Source: FAO, 2008).
2008; World Bank, 2008): 1) The combination of extreme
weather and subsequent decline in yields and cereal stocks; 2)
A rapidly increasing share of non-food crops, primarily biofu-
els; 3) High oil prices, affecting fertilizer use, food production,
distribution and transport, and subsequently food prices (Fig-
ure 3); and 4) Speculation in the food markets.
Although production has generally increased, the rising prices
coincided with extreme weather events in several major cereal
producing countries, which resulted in a depletion of cereal
stocks. The 2008 world cereal stocks are forecast to fall to their
lowest levels in 30 years time, to 18.7% of utilization or only 66
days of food (FAO, 2008).
Public and private investment in agriculture (especially in sta-
ple food production) in developing countries has been declin-
ing relatively (e.g., external assistance to agriculture dropped
from 20% of Official Development Assistance in the early
1980s to 3% by 2007) (IAASTD, 2008; World Bank, 2008).
As a result, crop yield growth became stagnant or declined in
most developing countries. The rapid increase in prices and
declining stocks led several food-exporting countries to im-