Food prices pushing world to poverty's 'danger zone'

Food prices pushing world to poverty's 'danger zone'

by PHILIP BRASHER

Global food prices have risen 36 percent over a year ago and threaten to drive millions more into poverty should costs continue increasing, the World Bank said.

Some 44 million people have been driven into extreme poverty since last June because of higher food costs, and another 10 percent increase in food costs would put 10 million more people into that category, the bank says. Another 30 percent increase would lead to 34 million more poor. The bank defines extreme poverty as living on less than $1.25 a day.

"With food prices we are at a real tipping point," said Robert Zoellick, president of the bank, which lends to and advises developing countries.

The rise in food prices has renewed criticism of U.S. biofuel policy, which requires and subsidizes the use of corn ethanol, creating competition for grain supplies.

The ethanol industry blames energy prices for rising food prices. "Anyone who has filled a gas tank the last few months has unwittingly witnessed the prime cause of soaring prices for all consumer goods, especially foods," the National Corn Growers Association said Thursday in a joint statement with some ethanol trade groups.

The World Bank agrees that higher energy prices have increased the cost of producing and transporting food but says that rising oil prices also raise the cost of food by encouraging the production of biofuels from food crops. A 10 percent increase in oil prices raises food prices about 2.7 percent, the bank says.

The price of corn is up 74 percent globally in the past year, while wheat prices have risen 69 percent.

In the past three months, the wholesale price of corn has jumped 37 percent in Mexico, 27 percent in Kenya and 25 percent in Uganda.

Zoellick declined to predict where prices would go but said tight grain supplies mean the world is in a "danger zone."

"We are in a period here where we have to be particularly alert to the dangers, because if you get spikes, they put greatest vulnerability on those who are poor and have the least ability to handle them," he said. "At the same time, we need to increase production, and that can create opportunity for poor countries."

The Obama administration has been leading a global effort to increase food production as a result of the 2008 food price spikes.

The administration asked Congress for more than $2 billion this year for agricultural development and food security initiatives, including a program that the World Bank oversees. The final budget deal provides under $1.3 billion, about the same amount budgeted in 2010.