The worst drought in the United States in half a century is driving up grain prices worldwide.
In particular, corn prices on the Chicago Futures Exchange have risen to record highs, causing those for wheat to climb in tandem.
Alarmed by the situation, World Bank Group President Jim Yong Kim issued a statement warning that rising grain prices threaten the lives of people in developing countries, which are heavily dependent on food imports.
But that is not all. Higher food prices in rising economies like China make it difficult for these countries to take effective measures to stimulate growth.
If their economies start foundering, the world economy as a whole could slide.
The Group of 20 nations are set to call an emergency meeting of their officials in charge of agricultural policies to address the problem.
United and coordinated international efforts are urgently needed to prevent any missteps, such as export restrictions. That would only fuel suspicions and speculation in the market, accelerating the rapid rise in prices.
The U.S. Environmental Protection Agency has proposed diverting vast amounts of corn for ethanol production back into the food chain. About 40 percent of the U.S. corn crop is used to produce biofuels.
A wide range of measures will be needed to ensure there are sufficient grain supplies available for human consumption and to rein in excessive price increases.
As it happens, the situation is not nearly as serious as in 2007 and 2008, when global food prices skyrocketed.
Other key grain producing countries say there is no absolute shortage in the supply of staple grains, including corn.
A wave of speculative bets on poor harvests in the United States is behind this latest rise in prices.
The U.S. Department of Agriculture originally predicted a large yield of corn for this year. The bullish forecast triggered moves to cut back stocks in the United States and elsewhere, setting the stage for the dramatic upswing in prices.
Adding to upward pressure on grain prices is a heavy and growing influx of investment funds into commodity markets due to extremely easy money policies in Japan, the United States and Europe.
As the world economy has been weakening, major industrial countries have become more dependent on easy credit for their economic growth.
This trend is threatening to choke economic recovery by pushing up grain prices.
The G-20 nations need to respond effectively to the "financialization" of commodity markets by addressing the challenges posed by growing financial investments in this area.
They should start by offering more accurate statistics and forecasts concerning supply and demand. They also need to tighten regulatory control on speculative investments.
With demand for food rising in emerging countries and other parts of the world, there is also a great need to make medium- to long-term policy efforts to encourage investment for expansion of grain production.
Another big problem concerns the vast amounts of food that are thrown away in industrial countries.
The latest grain price surge is expected to have only limited effects on Japan because the effects are offset, to a great extent, by the high value of the yen and falling cargo shipping costs.
But Japan cannot afford to remain indifferent to the problem.
Every year, some 2,000 tons of food are discarded in Japan, or the calorie equivalent of a quarter of food sold in this nation.
We all need to think seriously what we can do to help fix the situation.
--The Asahi Shimbun, Aug. 27
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