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Weather holds the key to the world’s food price volatility

September 7, 2012

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By Garry White

The World Bank’s Food Price Index soared by 10pc in July, but global grain
stocks are currently high enough to prevent a repeat of 2008’s food riots,
according to the World Bank. Things could rapidly change though.

The index, which weighs the US dollar price of internationally traded food commodities, shows that sharp price increases were felt across the board in July. Rice, which fell 4pc, was the only major exception.

The price of maize and wheat rose by a quarter and soybean prices jumped 17pc over the month, with increases prompted by the worst drought in 50 years in the US Midwest. Poor weather in Russia has also added to supply-side fears.


The World Bank was reassured by the decline in rice prices. “Large supplies of
rice from bumper crops and increasing competition for Thailand (the world’s
largest exporter) have led to a recent rice price decline,” it said. “Weak
demand from the eurozone and a slight growth slowdown in China and the
developing world in general all favour price moderation.”

However, it warned that “the jury was still out”, citing potential threats such
as major producers pursuing “panic policies” such as restricting exports and
weather developments in the near future “especially related to el Niño”.

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