World Bank warns of food price volatility

2 August 2012

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2 August 2012 | Kamalpreet Badasha

The World Bank has warned of the threat of rising food prices if adverse weather conditions continue to affect harvests and major grain stocks run low.

The organisation is supporting an initiative to increase food market transparency. The Partnership for Agricultural Market Information System is an initiative designed to help governments make informed responses to food price spikes occurring presently.

The price of non-rice grains have risen since mid-June, with wheat increasing more than 50 per cent and corn rising by more than 45 per cent. Soybeans prices went up 30 per cent since the start of June and have risen by almost 60 per cent since the end of 2011. These higher grain prices will be passed on in the cost of bread, processed food and animal feed, which in turn increases the price of meat.

The sharp increase in prices has been attributed to the weather with the US experiencing drought and continuous rain affecting European wheat crops. Low rainfall has had a negative impact on wheat crops in Russia, Ukraine and Kazakhstan. And India has experienced 20 per cent less than average annual monsoon rainfall. If these adverse conditions continue, food price volatility will cause unpredictability in the market. This would lead to greater financial risk, discouraging agriculture investment. It would also result in increased food security risk for consumers and governments.

The World Bank has predicted higher than average grain prices until at least 2015. The organisation is preparing to help poorer nations if the current situation continues through measures including policy advice, increased agriculture investment and is coordinating with UN agencies to provide assistance.



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