Source: London Guardian

Food prices are expected to hit new highs in the coming weeks, tightening the squeeze on UK households and potentially triggering further unrest in developing countries unless there is heavy rainfall across drought-affected Europe, the United Nations has warned.

The average global price of cereals jumped by 71% to a new record in the year to April, more than three times higher than a decade ago, according to latest UN figures, prompting its Food and Agriculture Organisation to warn that Europe faces a pivotal few weeks.

With the dry spell forecast to continue for several weeks across Europe, Abdolreza Abbassian, senior grains economist at the FAO, said: "Europe is entering a very critical month. We can't do without rain any more. If the current situation continues prices will respond very aggressively."

"Our fear is that we still haven't seen the worst of food inflation in vulnerable countries and that could be coming. One way or another, rising food prices bring hardship on their people and you can't rule out the possibility of further food riots. A lot depends on the next few weeks and it's impossible to predict how Mother Nature will behave," Abbassian added.

The UN warning came after the release of data showing that the amount of speculative money that has been pouring into basic foodstuffs – and other commodities – also hit a new record in April, putting additional upward pressure on prices that are already being forced higher by the prospect of further crop failures.

The amount invested in commodities through exchange-traded funds (ETPs), jumped to $451bn (£273bn) in April – more than 40 times higher than a decade ago – according to new figures from Barclays Capital. It said investors were attracted by what they believed would be higher returns from raw materials on the back of growing demand from emerging markets such as China and India.

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