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Food shock: Market volatility a bigger threat than the shortage of grain

Source: Globe & Mail, Oct 7, 2010

The global food crisis that has been looming for years has arrived: Only it’s not the one we’ve been expecting.

Fears about the food supply have been high since prices spiked with oil in 2008. When a third of the Russian wheat crop fell to drought this summer and the country slammed its borders to exports, a new panic was triggered: Wheat prices soared 50 per cent, pushing up other cereals. Food riots broke out in Mozambique. The United Nations convened an emergency meeting of experts. Just this week, drought-stricken Ukraine announced export quotas on wheat pegged to last through December.

But for all of this, there is no real shortage of food in the world. Instead of a supply crisis, what has dawned is a new era of increased volatility. Unpredictable spikes and tumbles in some of the world’s most vital food commodities, most of them grains, are becoming more frequent.

The shocks are provoking anxiety from the farm gate to government offices and the trading floors that lie in between. More critically, they are prompting governments to take steps to tame jittery markets, steps that experts say are fuelling the volatility rather than dampening it.


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