Forget The Economist’s hamburger index, which measures purchasing power parity (“PPP”) by comparing the price of MacDonald’s burgers around the world. New numbers show that the price of all food peaked at a new record last month:
“The new figures clearly show that the upward pressure on world food prices is not abating. These high prices are likely to persist in the months to come,” FAO economist and grains expert Abdolreza Abbassian was quoted as saying.
The index is a measure of monthly price change. FAO compares the average of five food baskets against the average price those shares would have demanded from the export market in the baseline years 2002-2004:
FAO separates food baskets by commodity group. This month dairy tips the scale as the highest of the high risers, a result of constant dairy demand and a “seasonal” drop in production.
Here’s a chart that shows all the food commodities, and FAO’s list of explanations for all those changes below:
The FAO Cereal Price Index averaged 245 points in January, up 3 percent from December and the highest since July 2008, but still 11 percent below its peak in April 2008. The increase in January mostly reflected continuing increases in international prices of wheat and maize, amid tightening supplies, while rice prices fell slightly, as the timing coincides with the harvesting of main crops in major exporting countries.
The FAO Oils/Fats Price Index rose by 5.6 percent to 278 points, nearing the June 2008 record level, reflecting an increasingly tight supply and demand balance across the oilseeds complex.
The FAO Dairy Price Index averaged 221 points in January, up 6.2 percent from December, but still 17 percent below its peak in November 2007. A firm global demand for dairy products, against the backdrop of a (normal) seasonal decline of production in the southern hemisphere, continued to underpin dairy prices.
The FAO Sugar Price Index averaged 420 points in January, up 5.4 percent from December. International sugar prices remain high, driven by tight global supplies.
By contrast, the FAO Meat Price Index were steady at around 166 points, as falling prices in Europe, caused by a fall in consumer confidence following a feed contamination, was compensated by a slight increase in export prices from Brazil and the United States.
Go to Global Food Price Monitor, for details on domestic food price developments.
Food price index means very little out of context. Here’s The Economist’s index of all commodities (including food). Food is up, but everything is up, really.
Commodity prices don’t even take service industries into effect — and service dollars are a huge part of the world’s economy. We in the US are familiar with the importance of service dollars in the US economy (running on so much subsidy), but many developing nations also rely heavily on service industries, like tourism.
