WORLD ECONOMIC FORUM (WEF) ALERT: ALARMING FOOD PRICE HIKE IS A PRIORITY FOR 2008

A price alert that has been launched for 2008 by the World Economic Forum (WEF) in Davos foreshadows a change in hierarchy within the economy and the new and central role of development for agriculture over the following years in both the supply of food products as well as the opportunity for the creation of alternative energy sources.

This was recently affirmed by Coldiretti president, Sergio Marini, in response to the World Economic Forum’s revelations that in 2008 the global food reserves will be at their lowest levels in the past 25 years and that world supplies are particularly exposed to crisis and natural disasters with the increase of factors that have now provoked food instability, like that of population growth, changing lifestyles, biofuels and climate change.

The reduction in the availability of food with the increase in costs is indicated together with the petroleum crisis, the U.S. recession and the globalization of the risks that threaten the world economy over the next 10 years.

This analysis has found the same results as that of the World Bank, which foresees a slowed growth in 2008 of 3.3%, and with that of the International Food Policy Research Institute that estimates a reduction of 16% of world agricultural production by 2020, resulting in a constant increase in prices world wide.

According to the Institute the age of low cost agricultural products has come to an end and, after a long period with prices continually decreasing, an inversion in structural trends has been registered.
The causes can be found in climate changes that cause a reduction in cultivated lands and a decline in productive yields, in the growing demand for dairy and meat based products from emerging countries like China and India, as well as the development of biofuels that are obtained from agricultural crops. According to the experts, the most influenced crops will be grains and their transformed products like bread and pasta, but also meat and dairy and their derivatives.

The decline of harvest yields has already been felt strongly in Italy with a record crop reduction in 2007 of olive oil (-17%), wine (-12%), and fruit
(-5.4%), mostly due to the country’s third hottest year recorded over the past two centuries according to the Institute of the Science of Atmosphere and Climate at the National Research Council of Bologna (ISAC-CNR).

Led only by housing costs, food costs are the largest chunk of spending of the average Italian’s monthly income, equaling about 19% with a value of 467 euros per month. Coldiretti emphasized that this is an evident demonstration that the record price hikes for basic foods like bread (+12.3%), pasta (+8.4%) and milk (+7.6%) have an effect on the cost of living.

Following these price hikes, it appears that 3 Italians out of 4 changed their eating habits, mainly by changing their shopping lists (40% of whom by making drastic cuts) and by increasing attention to reading labels and to the provenance of foods (favoring local items), according to the “Coldiretti-SWG 2007 Study” on the opinions of Italians and Europeans on food.

Though the overall spending on food remained the same (+0.1%), the quantities that families took home were less (-1.3%), though with an increased consumption in chicken (+6.2%), eggs (+5.3%) and water (+1%), while bread fell by 1.3%, together with pasta (-4.3%), wine (-8.4%), fruit (-2.6%) and vegetables (-2.6%) during the first 9 months of 2007, according to data calculated by Ismea Ac Nielsen.

Coldiretti points out how Italians have now taken refuge in the local foods of their regions, with 2 out of 3 Italians regularly buying locally made products because these products have not been influenced by petroleum based price hikes for transportation.

According to the Coldiretti study, of the 467 euros per month that each family sets aside for food, over half of it (238 euros, worth 51% of total) ends up in the hands of merchants, 140 euros (30%) goes to the food industry, and only 89 euros (19%) goes to the agricultural industry. This clearly indicates how, on average, prices have increased as much as five times by the time food arrives on dinner tables and, that it is necessary to intervene with the necessary structural changes that would eliminate inefficient food processes that slow down and make more costly the end food product.