China Prepares for ‘Severe, Long-Lasting Drought’

A severe drought in China is impacting food prices there and even, potentially, the situation in Egypt. From AP:

Premier Wen Jiabao led a State Council meeting Wednesday on increasing grain production in the country that’s both the world’s largest wheat grower and largely self-sufficient in supply.

The U.N.’s food agency has warned that the monthslong drought is driving up the country’s wheat prices, and now the focus is on whether China will buy more from the global market, where prices have already risen about 35 percent since mid-November.

The rising prices add to growing concerns in China about inflation, which the government sees as a potential source of social unrest. Average flour prices rose more than 8 percent in January from the previous two months.

Wheat futures were up Wednesday at both the Chicago Board of Trade and the Zhengzhou Commodity Exchange in China, where prices for September delivery hit a new high. They were at 3,051 yuan ($463) a ton Wednesday night.

Because Egypt is one of the world’s largest importers of wheat, and because the ongoing protests there have been partially sparked by rising food prices, a U.N. news dispatch suggests keeping an eye on how China’s drought impacts the situation in Egypt:

Across the region, we have seen civil protests driven by a complex array of different factors, but all sharing one thing in common – growing anxiety about rising food prices and concern about access to food.

In many of the protests, demonstrators have brandished loaves of bread or displayed banners expressing anger about the rising cost of food staples such as lentils. These are the nutritional building blocks of life, and if people feel that rising prices are pushing these food items out of reach, growing anxiety adds to the general feeling of exclusion, resentment and despair.

The protests and disturbances in the Middle East coincide with another period of rising global food prices. The UN Food and Agriculture Organization Food Price Index in January reached a new historic peak, rising for the seventh consecutive month and surpassing the peak of the 2007-2008 food price crisis….

And from the AP:

February 9, 2011 10:16 AM
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