The diversion of US maize into the production of biofuels, amid high energy prices, have pushed maize prices 84% higher year on year fueling rising global food prices, a report released by the World Bank Tuesday said.
In the first four months of the year, US maize demand used in ethanol production rose 8% year on year, and the trend may continue given the prevailing uncertainties in the energy market, the report said.
The World Bank Food Price Index rose 33% from July 2010 to July 2011 as prices of major food commodities rose across the board -- maize leapt 84%, sugar increased 62%, wheat 55% and soyabean oil 47%.
Comparatively, crude oil prices rose 45% and fertilizer prices jumped 67% over the same period.
After peaking in February this year, the World Bank Food Price Index for the April-July period averaged 278.3.
Global stocks of key food commodities remain alarmingly low, the World Bank said. For example, the stocks-to-use ratio for maize is currently at 13% -- the smallest percentage since the early 1970s. Coupled with the fact that the realization of the forecast yields is contingent on benign weather conditions in major exporting countries, the low stock environment has created a situation in which even small shortfalls in yields can have amplified effects on prices.
The price of specific commodities, like petroleum products, rice and sugar will continue to have an important bearing on overall food price movements in the coming months, the report added.
In July, the average price of Dated Brent crude increased by 10% from February, and uncertainties about the global economy combined with the political situation in the Middle East and North Africa region are likely to keep the oil prices volatile in the short term.
Meanwhile, concerns about Brazil's lower-than-expected sugarcane yields have also caused sugar prices to increase by 29% between May and July 2011.
Given that sugar and vegetable oils together account for roughly 50% of the World Bank's Food Price Index, volatility in these prices is likely to have unexpected effects on food prices in the months ahead.
In addition, the recent surge in rice prices -- which increased by 11% in the last quarter -- was a departure from the general decline since February and can have an impact on food price indices in the coming months.
The Horn of Africa is facing a food and humanitarian crisis with more than 12 million people in urgent need of humanitarian assistance with Somalia being the hardest hit.
