April 2008 Report - Central Bank of Trinidad and Tobago

CENTRAL BANK OF TRINIDAD AND TOBAGO MONETARY POLICY REPORT APRIL 2008
Chart 19
Prices of Selected Grains: Wheat, Corn and Soybean
attempt to reduce energy costs. Data from the FAO indicate
that 30 per cent of US corn output is being re-directed to
the production of ethanol. The US currently accounts for
70 per cent of the world’s exports of corn.
(b) Consequences for Global Food Prices
The combined effects of these environmental and
economic factors have resulted in sharp increases in the prices
of wheat, corn, soybean and in dairy and meat products.
Table 7 shows, for instance, that in March 2008, the prices
of wheat, corn and soybean increased by 129 per cent, 29
per cent and 67 per cent respectively in March 2008 relative
to the corresponding period in 2007 (Chart 19).
The sharp increase in the prices of many staple food
commodities has been a major contributory factor to rising
food inflation at the global level. Table 8 shows that food
inflation rates have increased drastically in some countries
like China, South Africa, Brazil and Venezuela. In addition,
the UN estimates that poor countries will experience a 35
per cent increase in their import bills for cereals such as rice
and flour.
(c) International Policy Responses to Rising
Food Prices
Rising global food prices are threatening to undermine
the gains made in global poverty reduction over the last
decade. The FAO has identified fourteen countries (half of
which are in Africa) that are in danger of facing impending
food shortages. Also, there has been increased social unrest
in countries such as Haiti, Egypt, Senegal, Ethiopia, Mexico,
Indonesia and Peru as a direct result of higher food prices.
Governments all around the world have been taking
direct action to reduce the price of staples to the consumer
and to mitigate the impact of higher food prices on their
populations (Box 1). Some countries such as Indonesia, Peru
and Turkey have reduced and/or eliminated import duties
on a range of agricultural products in order to lessen the
impact of rising commodity prices on consumers. Others
such as China, Russia and Venezuela have imposed price
controls on items such as bread, milk and eggs.
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