Trade

With an estimated 44 million people falling into poverty since June 2010, rising food prices and increasing agricultural price volatility is at the forefront of global attention. Commodity exchanges have long been touted as a way to mitigate the effects of price volatility and increase economic efficiency in a liberalized market environment. As with other aspects of global agricultural markets, however, exchange markets are facing increasing global interdependence as traders draw on information generated both domestically and internationally.

Successful global agricultural trade hinges on open, secure agricultural markets. Such markets provide risk management by allowing for inter-regional diversification of crops and food products and by reducing price differences through market integration. In other words, secure, well-functioning markets can balance one country’s food deficit with another’s surplus, and vice versa. In this way, global trade can support global price stability and food security.

With the world's population predicted to reach 9 billion people by the year 2050, issues related to global food security have taken on a growing urgency. Rising commodities prices, adverse weather events, increased use of biofuels, global and domestic trade policies, and shifting consumption patterns in the developing world will all come into play as the world's population grows. Developing appropriate policies to address such challenges is critical to improving and maintaining global food security.

The daily global news continues to be inundated with stories of rising food prices, and accompanying rises in poverty and hunger. Recent droughts in China have been added to the list of factors driving food prices, specifically commodity prices, up around the world. Policymakers are now faced with decisions regarding the appropriate response to these increases.

Global food prices increased for the eighth consecutive month in February, according to the FAO Food Price Index. With the exception of sugar, prices of all agricultural commodities continue to rise, bringing the Price Index to its highest level on record. In particular, the FAO expects a sharp decline in cereal stocks in 2011 due to increased global demand and decreased production. Export prices of major grains have risen 70 percent since February 2010.

To view the full report, visit FAO - News Article: World food prices reach new historic peak