World leaders must take swift action to avert a possible food price shock in 2013, Mexico’s President Felipe Calderon says, warning unchecked price volatility in staple food items could trigger an escalation in poverty to crisis levels.
“I'm afraid that this new phenomenon of rising of prices of food around the world will provide a new round of crisis related with poverty,” Calderon told CNBC in an exclusive interview on Tuesday.
“The problems in Africa, even the Arab spring, in my opinion are some way or another related to the price of food,” Calderon said, adding that next year could mark “a new round of very high prices.”
“All the countries should do something and quickly in order to avoid any social and political turmoil around the world,” he added.
Mexico suffered a popular backlash after corn prices surged in 2007, making tortillas — the staple food product in Mexico — more expensive, and sparking ‘tortilla riots’ in major cities across the central American country.
The worst drought in more than 50 years in the U.S. has sent soybean and corn prices to new all-time highs, stoking inflation fears and prompting leaders to call for action against financial market speculators blamed for driving prices higher.
In the latest development, French President Francois Hollande launched a global campaign on Tuesday to win support for creating strategic stockpiles of agricultural commodities, one of the boldest measures yet to tame volatile food prices, Reuters reported.
Calderon stopped short of blaming speculators for the food price spikes but noted hedge funds, investment banks and institutional investors are playing an increasing role in dictating the direction of broader markets.
“I don't want to use the word speculation but the point is four years ago, more than 90 percent of the purchases of grains and food came from companies related to production or distribution of grains,” Calderon said. “Today, less than 60 percent are coming from those enterprises. More than 40 percent are operations related to financial institutions.”
He added: “So the financial markets are growing a lot and they are participating in a very active manner in all the chains of food. I don't want to say that is speculation but anyway we need to observe what exactly is happening there.”