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Record food prices could spark more unrest, inflation

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Global food prices hit a record in January, and recent catastrophic weather around the world could put yet more pressure on the cost of food, Reuters reported.  

Up for the seventh month in a row, the closely watched Food and Agriculture Organization (FAO) Food Price Index today touched its highest point since records began in 1990, and topped the previous peak of 224.1 in June 2008 during the food crisis of 2007-08. The index averaged 231 points in January, an increase of  3.4 points from December.

“The new figures clearly show that the upward pressure on world food prices is not abating,” FAO economist and grain expert Abdolreza Abbassian said in a statement. “These high prices are likely to persist in the months to come.”

Surging food prices have come back into the spotlight after they helped fuel the discontent that toppled Tunisia’s president in January and have spilled over to Egypt and Jordan, raising expectations that other countries in the region would secure grain stocks to reassure their populations.

World Bank President Robert Zoellick urged global leaders to “put food first” and wake up to the need to curb increased price volatility. “We are going to be facing a broader trend of increasing commodity prices, including food commodity prices,” he told Reuters in an interview.

A mix of high oil and fuel prices, growing use of biofuels, bad weather and soaring futures markets pushed up food prices in 2007-08, sparking violent protests in countries including Egypt, Cameroon and Haiti.

Janis Huebner, an economist at Germany’s DekaBank, said inflation partly fueled by increasing food prices could in turn trigger interest rate rises in several countries this year. “This could mean a slowing down of growth in the countries which raise their interest rates,” he said. “This could involve Asian countries and other regions; this would somewhat brake growth, but I do not expect a hard landing.”