By John W. Schoen Senior producer

The U.N.'s fear is that the latest run-up in food prices could spark a repeat of the deadly food riots that broke out in 2008 in Haiti, Kenya and Somalia. That price spike was relatively short-lived. But Abbassian said the latest surge in food stuffs may be more sustained.

"Situations have changed. The supply/demand structures have changed,” Abbassian told the Australian Broadcasting Corp. last week. "Certainly the kind of weather developments we have seen makes us worry a little bit more that it may last much, much longer. Are we prepared for it? Really this is the question."

Price for grains and other farm products began rising last fall after poor harvests in Canada, Russia and Ukraine tightened global supplies. More recently, hot, dry weather in South America has cut production in Argentina, a major soybean exporter. This month's flooding in Australia wiped out much of that country's wheat crop.

As supplies tighten, prices surge. Earlier this month, the FAO said its food price index jumped 32 percent in the second half of 2010, soaring past the previous record set in 2008.

Prices rose again this week after the U.S. Department of Agriculture cut back its already-tight estimate of grain inventories. Estimated reserves of corn were cut to about half the level in storage at the start of the 2010 harvest; soybean reserves are at the lowest levels in three decades, the USDA estimates, in part because of heavy buying by China. The ratio of stocks to demand is expected to fall later this year to "levels unseen since the mid-1970s," the agency said.

"I haven't seen numbers this low that I can remember in the last 20 or 30 years," said Dennis Conley, an agricultural economist at the University of Nebraska. "We are at record low stocks. So if there any kind of glitch at all in the U.S. weather, supplies are going to remain tighter and we might see even higher prices."

Higher oil prices are also pushing up the cost of food — in two ways. First, the added shipping cost raises the delivered price of agricultural products. Higher oil prices also divert more crops like corn and soybeans to biofuel production, further tightening supplies for livestock feed and human consumption. Conley estimates that more than a third of the corn produced in the U.S is now used to make ethanol.

Article here: http://www.msnbc.msn.com/id/41062817/ns/business-consumer_news/.