Jan. 25 (Bloomberg) -- Risks of global instability are rising as governments cut subsidies that help the poor cope with surging food and fuel costs to ease budget crunches, the head of the United Nations’ World Food Program said.
“We’re in an era where the world and nations ignore the food issue at their peril,” Josette Sheeran said in an interview yesterday at the agency’s Rome headquarters.
The global recession has eroded government aid that helped people in poorer countries afford bread, cooking oils and other staples. The trend raises the odds of unrest even though prices have improved in many nations from 2007-2009, Sheeran said. During that period, more than 60 food riots occurred worldwide, according to the U.S. State Department.
The U.N.’s Food Price Index surged to 214.8 in December, exceeding the previous record in 2008 when rising costs and fears of shortages sparked riots from Haiti to Egypt. More than 100 people have died this month in protests in Tunisia against food inflation, unemployment and alleged corruption, according to the U.N., and at least three were killed in Algeria.
Falling Cereal Output
Global output of all cereals, including rice, wheat and corn, will drop 1.4 percent to 2.23 billion metric tons this season, while demand will rise 1.8 percent to 2.26 billion tons, the U.N. Food and Agriculture Organization said in December. That will push global stockpiles 6 percent lower to 525 million tons, and mark the first cereal deficit since the 2008 food crisis, according to the U.N. agency data.
In the Philippines, where the World Bank estimates one out of four live on less than $1.25 a day, the government raised on Dec. 7 the retail price of rice sold from state stockpiles by 8 percent to 27 pesos (61 cents) per kilogram.
The Philippines, the world’s biggest rice importer, will curb sales of the grain from state stockpiles this year and will reduce the size of the inventory to about 30-days worth of consumption, Agriculture Secretary Proceso Alcala said Dec. 17. Stockpiles were equal to 52 days of consumption in October.
President Benigno Aquino’s government plans to cut rice imports, even though the nation’s crop was decimated by the heaviest rainfall in at least four decades in late 2009 and drought in early 2010, following by flooding.
“Many of the world’s subsidy regimes and support regimes have shrunk,” Sheeran said.
Bolivia experienced protests last month over cuts in fuel subsidies that increased gasoline prices as much as 82 percent. The government pledged to use $380 million saved to boost farmers’ incomes.
Malaysia’s inflation rate rose to a 19-month high in December after it reduced subsidies on fuel and sugar in an effort to narrow the budget deficit by more than half in the next five years. The government spends about 73 billion ringgit ($24 billion) a year keeping prices of gasoline, flour, sugar and other essential goods artificially low.
Togo will increase electricity prices by as much as 25 percent this month as the government stops subsidizing power, a cabinet official said yesterday. Jordan increased public salaries and subsidies last week to counter protests over falling living standards, after riots in Tunisia toppled the nation’s ruler.
Rising Food Costs
Global food costs jumped 25 percent last year to an all-time high in December because of record sugar and meat prices, according to the UN. Countries probably spent at least $1 trillion on imports, with the poorest paying as much as 20 percent more than in 2009, the UN says.
Cereal crops such as wheat and corn are not at records, making the current situation less severe than in 2008 for poorer consumers that rely on grains, Sheeran said. Nations in sub-Saharan Africa, the region most prone to hunger, also have had better harvests in the past year than three years ago, alleviating pressure on local food supplies, she said.
The World Food Program is the world’s largest food-aid organization.
Corn traded in Chicago advanced 52 percent last year, while wheat jumped 47 percent and soybeans gained 34 percent.
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