World Moves Closer To Food Price Shock

The world has moved a step closer to a food price shock after the US government surprised traders by cutting stock forecasts for key crops, sending corn and soyabean prices to their highest level in 30 months.

The price jump comes after the UN’s Food and Agriculture Organisation warned last week that the world could see repetition of the 2008 food crisis if prices rose further. “Stocks of corn and soyabean are at incredibly tight levels ... and the markets are surging to incredibly strong prices,” Chad Hart, agricultural economist at Iowa State University, said. The US is the world’s largest corn supplier, meeting more than half of global import needs. Corn is an important ingredient in animal feed, and the tightening market partly reflects stronger appetites for meat in emerging markets. Record ethanol production in the US will also swallow up nearly 40 per cent of the US crop. The shares of food companies such as Nestlé fell as analysts said they would struggle to pass rising wholesale costs to consumers.