MANILA/MILAN (Reuters) - The U.N.'s food price index likely hit a new high in January and recent catastrophic weather around the globe could push even higher the cost of food, an issue that has already helped spark protests across the Middle East.
World Bank President Robert Zoellick urged global leaders to
"put food first" and wake up to the need to curb increased price volatility.
"We are going to be facing a broader trend of increasing commodity prices, including food commodity prices," he told Reuters in an interview.
The food price index of the U.N.'s Food and Agriculture Organisation's(FAO), measuring monthly price changes for a food basket of cereals, oilseeds, dairy, meat and sugar, hit a record in December, above a previous high set in June 2008 when there were food riots in some countries.
Its latest index is due to be released on Thursday.
This week's massive cyclone in Australia, a major winter storm across much of the United States and flooding in key commodity producer Malaysia look set to worsen the squeeze.
"I find it interesting that we've had two years of good production and we've been unable to build a big enough buffer in stocks to cause this sharp rise in food prices again," said Wayne Gordon, a grains analyst for Rabobank in Sydney.
A mix of high oil and fuel prices, growing use of biofuels, bad weather and soaring futures markets pushed up prices of food in 2007/08, sparking violent protests in countries including Egypt, Cameroon and Haiti.
The FAO has warned food prices could climb even higher, expressing concern about global weather patterns.
Surging food prices have come back into the spotlight after they helped fuel the discontent that toppled Tunisia's president in January and have spilled over to Egypt and Jordan, raising expectations other countries in the region would secure grain stocks to reassure their populations.
"The broadbased nature of what crops have been wiped out over the past year means that it's going to take a while to actually rebuild and get production back in line with consumption," said National Australia Bank agribusiness economist Michael Creed.
White sugar futures hit a record high and raw sugar futures rose to their highest in more than 30 years on fears of the damage Cyclone Yasi would bring to the Australian cane crop.
The worst winter storm for decades in the United States drove wheat futures to the highest in nearly 2- years, and Malaysian palm oil prices are at 3-year highs as flooding hit crops.
The La Nina weather pattern, blamed for the bad weather affecting Asia-Pacific and Latin America, could last until April or early May, although its strength will be declining, according to the World Meteorological Organization.
STOCK BUILDING
Some countries, particularly where food prices account for a major part of household budgets, have been building up food stocks to try to contain prices -- and to limit the political and social fallout -- with forecasts the bad weather will continue.
In the run-up to the 2007/2008 food price crisis, the World Bank estimated that some 870 million people in developing countries were hungry or malnourished. The FAO estimates that number has increased to 900 million.
"2008 should have been a wake-up call, but I'm not yet sure all the countries in the world that we need to support this have woken up to it," the World Bank's Zoellick said.
Indonesia, Southeast Asia's biggest economy, last week bought 820,000 tonnes of rice, nearly five times what it had sought, lifting rice prices -- although rice is one commodity that remains well below its 2008 prices. It has also suspended import duties on rice, soybeans and wheat.
Algeria last week said it had bought almost a million tonnes of wheat, bringing its bread wheat purchases to at least 1.75 million since the start of January, and ordered an urgent speeding up of grain imports, a move aimed at building stocks.
"Some of the demand story is centered around high food prices then tend to lead to hoarding by a number of countries into their strategic reserves," Rabobank's Gordon said.
"So not only are they purchasing for current consumption, but they are also trying to build up strategic reserves, which basically are a bit of a double-barreled demand event."
(Additional reporting by Lesley Wroughton in Washington, editing by Jonathan Thatcher)
