The United Nations warned Thursday that with global food prices at a record high, more increases in the cost of oil and a drive by importers to stockpile food would cause problems on the cereal markets.
According to Reuters, the Food Price Index tracked by the U.N. Food and Agriculture Organization (FAO) set a second straight record in February, thanks to tight supply and higher costs for grains. It further warned that prices were likely to surpass the levels in 2008 that ignited food riots in many countries.
Abdolreza Abbassian, FAO economist, said in the report that prices are unlikely to drop at least until it is seen how the newest crops are faring. He added that further increases in the price of oil could hit grain markets hard. Those markets are already reeling under a 60% increase in U.S. benchmark wheat prices so far this year.
Abbassian said in the report, "Until we know about new crops, that means waiting at least until April, our view is don't expect any major corrections in these high prices; expect even more volatility now that oil has joined the crowd."