World Bank: Rising food prices means governments should strengthen social net

By Bernie Becker - 08/30/12 06:02 PM ET

The World Bank, citing a 10 percent hike in food prices in July, urged world governments on Thursday to burnish their support programs for the poor.

With stark droughts in both the U.S. and Eastern Europe, the bank said that the prices of wheat and maize both jumped by a quarter from June to July, while soybean prices rose by about a sixth.

In all, the bank’s food price index said world prices had grown by 6 percent since last July.

Jim Yong Kim, the World Bank president, said that his organization was giving its most support to world agriculture in two decades, spending more than $9 billion in the fiscal year that finished at the end of June.

Kim added that residents of Africa and the Middle East were most vulnerable, and that the World Bank is ready to go further, if necessary. But he also said governments needed to ensure their own safety nets were strong enough.

“We cannot allow these historic price hikes to turn into a lifetime of perils as families take their children out of school and eat less nutritious food to compensate for the high prices,” Kim said in a statement. “Countries must strengthen their targeted programs to ease the pressure on the most vulnerable population, and implement the right policies.”

The Obama administration and Congress have sparred over how to combat the current drought in the United States, the world’s largest exporter of corn and soybeans.

Unable to pass a broader farm bill, the House passed a more narrow drought relief package before leaving Washington in early August. But the Senate, which had passed a farm bill that included drought protection, declined to take up that measure, saying the House should have passed its own farm bill.

The Federal Reserve, in its periodical look at the economy, also expressed concern this week about the rise in commodity prices.

On the other side of the Atlantic, droughts in Russia, Ukraine and Kazakhstan have dragged down wheat production. Rice prices, however, dropped by 4 percent.

At the same time, the World Bank says it does not yet believe conditions will get as bad as in 2008, when rising food prices led to instability, and even riots, in a string of countries around the world.

Still, the bank also said that a spike in energy prices and continued weather issues could force the same sort of hike in grain prices that happened four years ago.