High food prices has potential for political trouble: S

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New Delhi, Feb 15 (UNI) If it is the sub-prime crisis dominating headlines, significant threats emerge for the global economy in the form of high food prices with the potential for political trouble in the future quite high.

''In the last two years, we have seen significant uptrend in the food prices. Wheat is the most visible example and now seeing it in oil seeds,'' Standard and Poor's (S&P) Asia Pacific Chief Economist Subir Gokarn said.

The Economist's food-price index is now at its highest since it began in 1845, having risen by one-third in the past year.

It is reported that the Food and Agriculture Organisation of the United Nations' food price index increased 37 per cent last year.

A couple weeks ago, protests broke out in Pakistan and Indonesia over wheat and soybean shortages. Egypt banned rice exports to keep the food in the country, and China place price controls on cooking oil, grain, milk, meat, and eggs.

Also, the FAO reports that food riots have recently broken out in Mexico, Morocco, Guinea, Mauritania, Senegal, Uzbekistan, and Yemen.

Dr Gokarn said the Chinese new year last week was tainted by bad weather and high food prices in the form of high prices of pork which rose by as much as 50 per cent over last six months.

This is starting to show impact over other countries like Indonesia and the potential for political trouble is quite high, he added.

''We are in a comfortable situation because we had a good monsoon this year, but one bad monsoon could tip the balance and we will then be vulnerable to food inflation,'' Dr Gokarn said.

Domestically prices have shot up 82 per cent, 34 per cent, 24 per cent, 22 per cent, 21 per cent, 19 per cent and 18 per cent from January 2003 to January 2008, virtually taking out seven essentials like coffee, pulses, wheat, condiments&spices, fruits and vegetables, eggs, fish and meat and milk out of the aam aadmi's reach.

He attributed the high prices of food articles to the persistent drought in Australia and diversion of oil seeds to bio-fuels.

Also, higher energy prices will affect fertiliser utilisation which will lead to lower yield of crops and resultant low food production.

''There is a great threats in agriculture front in the medium to long term one has to be aware of it,'' Dr Gokarn said.

HSBC Group General Manager and Country Head Naina Kidwai said, there exist ''fear of high food prices and the prospect of a failed monsoon would lead India to having import food items at a time when food prices have been at an all time high.'' UNI PBB SG PM1620

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