Libyan turmoil inflates fuel and food costs, states UN

Food costs are soaring skyward, reports CNN Money. This can be a natural by-product of increased production costs that come from the rise of oil costs following the Libyan protests. A report by the United Nations Food and Agriculture Organization indicates that the food price index, which measures the price of a basket of food commodities, was up 2.2 percent in February. At its current level, the global food index is as high as it has been since the measure was first instituted in 1990.

Food prices going up for commodities

Cereal, dairy, meat and many others food commodities were slightly lower in costs in Feb.. Then, they went up a lot. The U.N. Food and Agriculture Organization explained that wheat and coarse grain inventories are low while demand is high. That means that throughout 2011, the United States should expect high cereal prices. When compared to Feb. 2010, there was an increase in exporting costs this February. This increase was a 70 percent increase.

Oil prices pushed up by unrest in Libya

Because of the Libya violence shutting oil production down, the price of oil barrels went over $100 for the first time since fall 2008. The U.S. Energy Information Administration reports that U.S. drivers have been paying 25 cents more per gallon for gas in the past 10 days alone. This does not bode well for global food prices, said FAO director David Hallam in a statement.

“Unexpected oil price spikes could further exacerbate an already precarious situation in food markets,” writes Hallam. “This adds even more uncertainty concerning the price outlook, just as plantings for crops in some of the major growing regions are about to start.”

Jeet Dutta, an economist at Moody’s Analytics, sees no uncertainty when it comes to the connection between high oil costs and high food costs. Food production includes transportation. It cannot be forgotten.

“Energy is a big part of the cost bucket in food production,” Dutta told CNN. "Retail prices lag behind commodities, so consumers haven’t felt the full extent of recent increases."

Not sharing commodity materials

Even as global harvests expand, exporters are tightening the reins on such product supplies as corn, wheat and soybeans. Global supply ends up stopped. Costs have to go up. UBS AG is a global financial services business. It suggests that from Wednesday's closing prices, there could be a 7.6 percent rise in soybeans to $15 per bushel, wheat will go to $10 a bushel with a 23 percent increase and corn will get to $8.30 a bushel which is a 15 percent increase.

World Bank President Robert Zoellick said that just since June 2010, 44 million people have been put into poverty due to the high food commodities. In accordance with World Bank data, those 44 million join the more than 900 million individuals globally who go hungry on a daily basis.

Information from

Bloomberg

bloomberg.com/news/2011-03-03/food-prices-to-extend-gains-as-stockpiles-rebuilt-led-by-corn-ubs-says.html

CNN

money.cnn.com/2011/03/03/news/economy/food_prices/

U.S. Energy Information Administration

eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_home_page.html

Strife in Libya and the impact on fuel prices

youtube.com/watch?v=A_wDDi9RzrQ