A week after the UN's Food and Agricultural Organization (FAO) warned of a possible "food price shock" if prices continued to rise, the USDA downwardly revised its outlook for global harvests of key crops, sending future prices surging and fueling concerns over a repeat of the 2008 food crisis which sparked riots in over 30 countries. With riots already occurring in Algeria and Mozambique, the impending crisis even sparked a reaction by World Bank Chief Robert Zoellick, who sought to calm the already uneasy markets.
The global food situation doesn't look too promising, as floods in Australia and excessively hot weather in Latin America harm harvests, upward pressure is mounting on prices. According to the FAO, a basket tracking the wholesale cost of food commodities such as wheat, corn, rice, vegetable oils, and meats, has already topped 2008's peak values, reaching 214.5 points (compared to 213.5 on June 2008). And, as the USDA cuts its global grain supply outlook, soybean, corn, and wheat prices have spiked, nearing or passing 30-month highs.
The situation prompted a response by Zoellick, who a few months ago rallied the markets with talk of the gold standard. On this occasion, he told the Financial Times that "with food accounting for a large and volatile share of tight family budgets in the poorest countries, rising prices are re-emerging as a threat to global growth and social stability." Zoellick went on to enumerate measures to make markets more efficient, such as establishing small regional humanitarian reserves in disaster-prone, infrastructure-poor areas and improving long-range weather forecasting and monitoring. (See World Bank Chief Riles Up Economists By Talking Gold Standard).