Surging Food Prices Likely to Outlast China Caps: Chart of the Day

“Higher food prices are probably here to stay” even if China proceeds with price controls and other countries take similar actions, according to Brockhouse & Cooper Inc.’s Pierre Lapointe and Alex Bellefleur.

As the CHART OF THE DAY shows, a global food-price index from the United Nations Food and Agriculture Organization has more than doubled since 2000. U.S. consumer prices, excluding food and energy, have risen only 24 percent during the same period, as the chart depicts.

China may establish price caps on “important daily necessities” to contain inflation, the country’s Cabinet said yesterday. Consumer food prices climbed 10.1 percent in October from a year earlier, more than twice the overall inflation rate of 4.4 percent.

Government-imposed limits “can have significant short-term impact on agricultural commodities and food prices,” Lapointe, a global macro strategist, and Bellefleur, a financial economist, wrote today in a report.

Yet a growing world population and rising demand for meat from emerging markets point toward higher prices over time, the report said. Food producers will have to be able to pass along cost increases to consumers in order to prosper, they wrote.

“World prices have risen alarmingly,” the FAO wrote yesterday in a study of the food outlook. “The international community must remain vigilant against further supply shocks in 2001 and be prepared.”

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