Many Factors Pushing Food Crisis

Sunday, May 25th, 2008

The new hunger has triggered riots from Haiti to Egypt to Ethiopia, threatening political stability; it has conjured up a raft of protectionist policies, threatening globalization. And yet the response to this crisis from governments the world over has been lackadaisical or worse.

Start with the lunatic story of rice stockpiles in Japan. A new paper from the Center for Global Development describes how Japan’s government imports rice in order to comply with its global trade commitments but withholds most of that rice from consumers lest they decide they prefer it to the local sort. Japanese traditionalists view the consumption of sticky, short-grained rice as a patriotic duty. So rather than letting Mrs. Watanabe corrupt her children’s dietary habits, Japan stores much of its imported rice until it has become unfit for human consumption, whereupon it is sold to feed livestock.

From the perspective of Japan, stockpiling rice is a costly exercise in chauvinism, but Japan can afford that. From the world’s perspective, the stockpiling is more serious. More than 3 billion people depend on rice as their daily staple, and half of them are very poor. Japan could save many of them from hunger if it released its stocks.

The scandal is not just Japanese, however. In order for Japan to sell its rice outside its borders, it needs permission from the countries that supplied it — the United States, Thailand and Vietnam. A bit of U.S. leadership could deliver that permission easily, but the Bush administration is apparently worried about a backlash from American rice growers who see no downside in high prices, thank you very much. Not for the first time in Washington do the fat welfare queens of the farm lobby trample on the poorest people in the world.

Speaking of welfare queens, Congress passed a farm bill last week with thunderous bipartisan support. The bill includes reasonable subsidies for low-income Americans hit by high food prices, but it also sprays money at farmers who already earn more than the average taxpayer and contains shockingly little for the world’s poor. Congress is considering a separate bill that would boost international food aid more substantially. But that measure has been met with shameful indifference by lawmakers and consequently has stalled.

Congress won’t even act on a common-sense proposal from the Bush administration that food aid be reformed. If the United States bought some of the food that it donates from other countries, it could get aid to the needy faster and more cheaply. But that would upset American farmers and shipping interests, as a new Council on Foreign Relations paper emphasizes. The president’s proposal has few takers on the Hill.

The Europeans, for their part, have their own way of entrenching hunger. Just as Japan is wedded to its rice culture, Europe is irrationally hostile to genetically modified food. Study after study has found no danger in seeds that have been manipulated to grow better, withstand insects or survive in arid soil. But the Europeans still feel squeamish, and their hang-up deters Africans from taking advantage of crop science lest their exports be barred from European markets. Again, a peccadillo that to Europeans is affordable starves people in the poor world.

Finally, poor countries themselves have made things worse. Panicked at the prospect of food riots, countries with crop surpluses have forbidden exports in an attempt to bottle up supply and keep prices down. More than 40 countries have imposed some kind of export restraint, with the result that countries suffering food deficits have seen prices hit the roof. This nationalized hoarding is frustrating international relief efforts. The World Food Program has sought to buy food from countries with surpluses, such as Pakistan, to ship to desperate neighbors such as Afghanistan. But Pakistan drags its feet about selling.

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Food wars and the challenge for peace-makers

Sunday, May 25th, 2008

Everyday concerns of the population rarely reach the negotiating table, in part because the economic and social problems in conflict-ridden societies are extremely complex, involve many actors and can only be resolved in the long term.

So what happens when people are driven to kill one another for food? It’s a critical question to ask as the world faces a sudden and unexpected food price crisis that is threatening to plunge millions back into poverty.

The sharp spike in food prices this year has already generated violence. Food riots in parts of Africa and the Caribbean have created social and political instability. In rice-growing countries like India, Vietnam and Thailand, hoarding has begun with export bans already in place, creating inter-state friction.

Burma’s rice-growing capacity has been devastated by Cyclone Nargis, which will add to price pressures in the coming months.

This is largely a crisis born of inflation and other market factors rather than fundamental shortages. Prices for the benchmark Thai variety of rice, a food staple across much of Asia, have increased threefold in a year, reports the Asian Development Bank. Meat prices have risen by 60% in Bangladesh in the year ending in March, and by 45% in Cambodia and 30% in the Philippines.

With this sharp increase in the price of basic staples, people are already hoarding, stealing and fighting over scarce supplies. The World Food Programme calls it a “silent tsunami.”

The threat of conflict is real, both within societies where the numbers impoverished by higher grain prices is already high, and also between states as the trend towards commercial liberalisation and conglomeration is suddenly reversed and replaced by subsidies, price-fixing cartels and export curbs.

In Indonesia, retired general recently warned: “If students demonstrate it’s not a worry, but if hungry people take to the streets, now that’s dangerous.”

Hunger causes conflict when people feel they have nothing to lose and are willing to kill their neighbours over scarce resources. The peasant wars of the late 20th century in Central and South America and the wars that sprung from famine in Nigeria, Ethiopia and Sudan, are grim reminders of man’s most basic instinct, which is to fight to survive.

The trouble is that in terms of resolving conflict, we have come to rely less on material remedies and more on political artifice. Many of the internal conflicts that have been peacefully resolved in recent years only superficially addressed the material seeds of conflict. Peace agreements have been elite affairs where leaders of armed groups and governments reached an understanding on how to share power within a common state.

This approach is a sensible first step toward conflict resolution: by convincing the people inciting violence to lay down their arms, it becomes possible to start designing a wider range of policies addressing socio-economic issues.

However, typically, the socio-economic changes and the economic reconstruction and development the public was expecting trickled down slowly, if at all. Aceh remains one of the poorest parts of Indonesia, as does Mindanao in the southern Philippines - two areas of Southeast Asia where peace has been negotiated.

When hunger drives people into conflict, we might presume that peace-making will simply be a question of providing food. We would be mistaken. In fact, the experience of humanitarian aid agencies in the 1970s and ’80s in Africa was that food aid tends to fuel conflict, as the combatants seek to harness the supply of nutrition to the goals of war.

Experts tell us that farmers will eventually adjust the supply of food to cope with higher demand so that prices stabilise. More encouragingly, there are signs that decades of improving cooperation between states is stimulating a collective urge to resolve the crisis. The sharing of technology is key, says Kofi Annan, the former UN secretary-general. He believes that farmers in Africa could double food output in five to 10 years if rich countries partner them in a “Green Revolution” for a long-term solution to the continent’s food crisis.

But realistically, trade agreements and technological advances are slow-moving transformations.

In the meantime, officials in India warn that the food price crisis could plunge millions of people into poverty in a country that is already battling an internal Marxist insurgency that draws support from impoverished and landless peasants.

In Bangladesh, where the soaring cost price of staples has forced the marginally poor to give up meat and rice, there is a significantly increased risk of conflict in an already fractured polity.

The immediate challenge, therefore, is to prevent and resolve conflict arising from the food crisis. This places a significant burden on the international community to swiftly respond to outbreaks of violence.

But if people driven to war by hunger are less inclined to compromise, this makes the task of peace-making rather more challenging.

For one thing, conflict fuelled by hunger will be more widespread, exerting strain on international agencies involved in peace-keeping and humanitarian work. Food security is already fragile in many African countries and a protracted conflict tends to drift across borders, as we have seen in Sudan and Congo.

Peace-makers need to be more aware of, and recognise, the socio-economic roots of conflict. They should incorporate in peace agreements remedies for the population’s grievances and to enlist the international community’s support behind their implementation.

Such remedies should include pledges by leaders to address in a meaningful manner contentious issues such as land distribution, job creation, and racial and ethnic discrimination leading to socio-economic inequality.

The ethnic and religious wars of the last half of the 20th century have perhaps lulled us into a false sense of security.

We have grown accustomed to resolving conflict by forging political accommodation and compromise in situations where protagonists had much to lose materially if they kept on fighting.

But in a world where environmental and market pressures can treble the price of staple commodities in a matter of a few months, it is harder to find the grounds for compromise.

This calls for more effective negotiating skills, both domestically and internationally, bilaterally as well as multilaterally, to resolve these crises.

Markets must be kept open to assist with the flow of goods to crisis situations, and in affected countries solutions must be found that address both elite and popular grievances.

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US farm bill to ignore global food crisis

Saturday, May 17th, 2008

The US Congress has passed a $290 billion farm bill, which will increase subsidies to US farmers and cut international aid programs.

George Bush has threatened to veto the bill, however, but there is still a good chance it will be passed into law. Interestingly, the presidential candidates response to the bill were contrasting with John McCain critical, Hilary Clinton supportive and Barack Obama labelling it as “far from perfect”.

“It does not target help for the farmers who really need it, and it increases the size and cost of government while jeopardizing the future of legitimate farm programs by damaging the credibility of farm bills in general,” Agriculture Secretary Ed Schafer stated. “At a time of record setting income for farmers, it sends the wrong message to the rest of the country who are not experiencing the boom of the agriculture sector. This bill is loaded with taxpayer funded pet projects at a time when Americans are struggling to buy groceries and afford gas to get to work.”

“Eight months behind schedule, Congress will send a bill to the President that is trade distorting and fails to provide meaningful reform to the adjusted gross income limit, beneficial interest or the international food aid program,” he added.

Raymond Offenheiser, President of Oxfam America, was also strong in his criticism of the bill. “Faced with a mounting food crisis at home and abroad, Congress had the opportunity through the Farm Bill to shift funds from wasteful agricultural subsidies for large scale farms to food aid to meet the needs of the poor,” Mr Offenheiser said. “But instead, Congressional leaders settled on a bill that will continue to be costly to taxpayers, undermine our rural economy, damage our trade relationships, and hurt the world’s poorest farmers.”

The slight decrease in tax credits to ethanol producers (by 5c per gallon) and increased conservation funding were welcomed, although many believe the cuts in tax credits do not go far enough.

With global food prices skyrocketing this year and global fears of a potential food shortage growing, the bill sends a disappointing message from the US to the rest of the world.

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US drivers paying record pump prices

Sunday, April 20th, 2008

US average retail gasoline prices hit a record $US3.4737 per gallon ($NZ1.16/litre) on April 18, up 15.66 cents from the April 4 average, according to the nationwide Lundberg survey of about 7,000 gas stations.
Higher driving costs come at a tough time for US consumers, who are already struggling with higher food prices, a slowing economy, job losses and sinking home prices. In addition, surges in petrol demand during the peak driving months of June, July and August and higher costs could force motorists to cut back on their vacation travel plans, or reduce spending in other areas.
%26quot;Behind the record-high pump prices are other record highs that are less visible to the naked eye of the motorist, including record high crude oil prices and a record number of regulations that are adding costs to refining,%26quot; said survey editor Trilby Lundberg.
The WTI crude oil futures price closed at $US116.69 per barrel on April 18, up from $US106.23 on April 4, she said.
Boosting fuel prices still more, regulatory mandates are calling for increasing levels of ethanol to be added to gasoline. That%26#39;s raising expenses for refiners. In addition, the costs of spring reformulations of gasoline will also hurt prices at the pump.
Refiners and retailers have not yet fully passed on their higher costs to consumers, Lundberg said. When they do, prices will shoot higher.
%26quot;If crude oil prices do not retreat, then we will see somewhere between 10 cents to 30 cents rise in the retail price of gasoline, probably in the next few weeks,%26quot; Lundberg said.
So far this year, the price of gasoline has climbed 53.47 cents per gallon, Lundberg said.
CALIFORNIANS, TRUCKERS HURT
Californians are paying the most for their petrol, with average prices in San Francisco reaching $US3.88 per gallon. Some gas stations are charging as much as $US4 per gallon, Lundberg said.
California is the biggest state consumer of gasoline.
Trucking companies, too, are paying more for their fuel. That could boost prices for a range of goods that are transported, including produce and consumer products.
The average US retail diesel fuel price on the 18th of April hit $US4.2134 per gallon, up 15.13 cents.
The lowest average gasoline price was $US3.21 a gallon in Newark, New Jersey. Taxes account for most of the disparity in prices between California and New Jersey. Taxes in Newark add about 33 cents per gallon to the cost of gas, while in San Francisco, motorists pay about 68 cents per gallon toward taxes.

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Hawaii holiday home for Key

Sunday, April 20th, 2008

National leader John Key has just got a late Christmas present most New Zealand families being squeezed by soaring interest rates and high prices would envy - a tropical holiday home in Hawaii.
Key confirmed to the Sunday Star-Times he had bought an apartment on the swanky island of Maui at Christmas, with settlement a week ago. He was reluctant to reveal details of its location or what he paid for it.
%26quot;You can see the beach,%26quot; he said.
The holiday home is in addition to one John and Bronagh Key already own at Omaha, an exclusive beach settlement north of Auckland.
But Key, a multi-millionaire, said his luxurious lifestyle would not prevent him from relating to one of the incendiary political issues of the day - the pain ordinary New Zealanders feel as they grapple with soaring petrol prices, high interest rates and sharply rising food prices.
%26quot;It%26#39;s well known that I have a reasonably well off personal background. It%26#39;s also well known that I grew up in a state house. So I think I%26#39;ve got my feet pretty firmly on the ground,%26quot; he said.
Key said he had not declared the property in the Register of Pecuniary Interests of Members of Parliament because it was owned by his family trust, the JP and BI Key Family Trust. While MPs have to declare family trusts, they do not have to declare what the trusts own.
Asked what other properties were owned by the Key family trust, Key said he would need a moment to think. After 20 seconds of silence, Key said the trust owned five properties. Then Key rang back a few minutes later to say he had forgotten a further property owned by the family trust.
Apart from the Hawaiian property, there was an apartment in London used by his niece and four properties in New Zealand. They included a property in Wellington, the family home in Auckland and the Omaha property.
Key said he had sought advice on declaring property in the MPs register several years ago and was told by those administering the register that they did not want %26quot;pecuniary interest creep%26quot;.
%26quot;In other words, people declaring all sorts of things when they were in trust, because it%26#39;s going to lead to everybody listing every asset they own,%26quot; he said.
Key said he owned a similar number of properties to Prime Minister Helen Clark. She declared five properties - her home in Auckland, a town house in Wellington, an apartment in Christchurch, an investment property in Rodney and a house in the United Kingdom inherited from her father-in-law.

MAUI FOR MILLIONAIRES
* The cost of living in Maui is one of the highest in the US and the surfing mecca boasts many multimillion-dollar properties.
* The average property price in Kapalua, one of Maui%26#39;s premiere resort areas, is $US5 million ($6.35m), Wailea- Makena, another pricey beachfront location, is US$3.3m, while properties in Kaanapali go for $US2.2m.
* The median price for a condo in Maui in March 2008 was $US575,000.
* Maui is the second most developed and the second largest Hawaiian Island at 1885km2. It has a population of 139,884.

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Editorial: The end is not nigh

Sunday, April 20th, 2008

But the Cassandras should hold back on the wailing. If New Zealand holds its nerve, there will be a pause, not a collapse. It weathered the Asian Crisis that erupted in mid-1997 without foundering, and there is no reason to suppose it cannot do the same when it comes to the American credit crunch of 2008.
It has to be acknowledged that business is not brimming with confidence. The latest New Zealand Institute of Economic Research survey of business opinion showed a sharp deterioration, with a net 56 per cent of New Zealand businesses expecting the general business situation to worsen in the next six months.
That is understandable. The United States%26#39; economy is tipping into recession. The debate now is over how deep that recession will be. Some economists are predicting it will be one of the most severe in decades, pointing out that house price falls have wiped out US$2.2 trillion of wealth with little end in sight. The American consumer has been described as shopped-out, savings-less and debt-burdened. And that is flowing on, with European economies slowing. China will be hit, as the appetite for its exports wanes in the US, and emerging economies will also suffer as the US recession and global slowdown bite into the commodity markets. However, New Zealand is not going to fall into an economic abyss.
The spiralling world food prices that are putting pressure on at the supermarket are also putting money in Kiwi pockets. Fonterra has just lifted its payout to $7.30 a kilogram as prices have held up better than expected, largely due to drought. Chairman Henry van der Heyden believes there is still an upside in the prices. But Fonterra is taking a cautious approach because of the volatility of the international markets, and considering holding on to some of the season%26#39;s earnings.
That is sensible, and an example worth following. Many New Zealanders, especially those who own houses, have been enjoying the best of times. There is no reason to expect them now to enter the worst of times. Property values have soared, and despite the market cooling, there is no suggestion that it will follow the American market into collapse. Homeowners will need to be cautious when it comes to spending, but they are still much better off than they were before the boom.
There is also wiggle room, with tax cuts and the potential for the Reserve Bank to reduce interest rates to soften the impact. Governor Alan Bollard has advised banks and businesses not to overreact to the downturn, because the Kiwi economy %26quot;remains fundamentally sound and creditworthy%26quot;.
That is helpful as far as it goes, but Dr Bollard should remember actions speak louder than words. When external events push inflation above its 1-3 per cent target band, the policy targets agreement gives him some latitude to look to the medium term rather than the immediate figures.
If he needs to help New Zealand ride out the storm that started overseas with a rates cut earlier rather than later, he should use that latitude.

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Inflation in India rises to 3 year high of 7.41 percent

Sunday, April 20th, 2008

Inflation in India rose to over three-year high of 7.41 percent for the week ended March 29.

The wholesale price-based inflation was at 7 percent in the previous week.

The surge is mainly on account of rising prices of fruits and vegetables, pulses, cereals, condiment and spices and some manufactured items.

During the week, prices of fruits and vegetables shot up by 3 per cent whereas pulses went up by 1.2 percent.

The condiments and spices surged by 2 percent while wheat and fish marine each rose by 1 percent.

However, prices of milk and maize softened by 1 percent.

Minerals group was up mainly driven by prices of limestone which jumped 14 percent.

In the manufactured category, sugar prices went expensive by 2 per cent; groundnut oil and khandsari were dearer by 1 percent.

However, prices of imported edible oil got cheaper by 5 per cent and sun-flower oil by 3 percent.

The high inflation may prompt RBI to take tough monetary measures to ease out inflationary pressure in its annual credit policy, scheduled to be announced on 29th of this month.

Even the Prime Minister Manmohan Singh had stated Thursday that high food prices may hurt economic growth and economic reforms process. –IRNA

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No need for banks, businesses to hibernate - Bollard

Wednesday, April 16th, 2008

His comments come a day after the NZ Institute of Economic Research%26#39;s Quarterly Survey of Business Opinion showed plunging business confidence, with companies intending to raise prices as profits are squeezed.
Today Dr Bollard told the Marlborough Chamber of Commerce that the New Zealand economy remained fundamentally sound and creditworthy.
Banks should avoid overreacting to the economic downturn, he said.
But he also suggested that wage-bargaining parties should not assume tight labour market conditions would continue as the economy slowed.
%26quot;Banks, businesses and households alike need to recognise the new external environment and adopt a cautious approach — but don%26#39;t go into hibernation, the underlying economy remains robust,%26quot; he said.
New Zealand had experienced a record period of uninterrupted growth that had left the economy stretched.
Dairy prices had been strong and the Government%26#39;s fiscal policy was more expansionary this year, adding to inflationary pressures from fuel and food prices, Dr Bollard said.
He repeated earlier messages that wage pressures remained high, and in 2009 and 2010 there would be a significant boost to inflation from the emissions trading scheme.
%26quot;For these reasons monetary policy in New Zealand has been relatively tight for some time, with a current Official Cash Rate of 8.25 percent.
%26quot;This leaves us in a better position than some northern hemisphere countries that may still have to confront future inflationary pressures,%26quot; Dr Bollard said.
The Reserve Bank expected the New Zealand economy to see a markedly weaker growth profile this year because the housing market was now softening, as it needed to.
Also, the continued high New Zealand dollar was constraining export receipts, and dry weather this summer had hit dairy and meat volumes.
So far, the significant financial market disruption in the northern hemisphere was having only a limited effect on the economies of this country%26#39;s trading partners, with the exception of the US, he said.
%26quot;This does not look like unusually weak world growth, and indeed the continued strength of Australia and Asia is an important continued growth driver for New Zealand.%26quot;
But the disruption in financial markets had seen funding costs rise and credit conditions tighten in New Zealand and Australia, Dr Bollard said.
New Zealanders were seeing the effects of this through effective mortgage rate rises and reduced corporate credit availability.
It would be disappointing if New Zealand businesses slowed quality investment because of credit constraints.
While there had been a lot of pessimistic commentary in the media, the Reserve Bank saw events as a cyclical adjustment, he said.
%26quot;Because we have been so strong so long, some people have forgotten what a slower economy means.%26quot;
- NZPA

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Bollard tells banks not to “overreact” to downturn

Wednesday, April 16th, 2008

His comments come a day after the NZ Institute of Economic Research%26#39;s Quarterly Survey of Business Opinion showed plunging business confidence, with companies intending to raise prices as profits are squeezed.
Today Dr Bollard told the Marlborough Chamber of Commerce that the New Zealand economy remained fundamentally sound and creditworthy.
Banks should avoid overreacting to the economic downturn, he said.
But he also suggested that wage-bargaining parties should not assume tight labour market conditions would continue as the economy slowed.
%26quot;Banks, businesses and households alike need to recognise the new external environment and adopt a cautious approach — but don%26#39;t go into hibernation, the underlying economy remains robust,%26#39;%26#39; he said.
New Zealand had experienced a record period of uninterrupted growth that had left the economy stretched.
Dairy prices had been strong and the Government%26#39;s fiscal policy was more expansionary this year, adding to inflationary pressures from fuel and food prices, Dr Bollard said.He repeated earlier messages that wage pressures remained high, and in 2009 and 2010 there would be a significant boost to inflation from the emissions trading scheme.
%26quot;For these reasons monetary policy in New Zealand has been relatively tight for some time, with a current Official Cash Rate of 8.25 percent.
%26quot;This leaves us in a better position than some northern hemisphere countries that may still have to confront future inflationary pressures,%26#39;%26#39; Dr Bollard said.
The Reserve Bank expected the New Zealand economy to see a markedly weaker growth profile this year because the housing market was now softening, as it needed to.
Also, the continued high New Zealand dollar was constraining export receipts, and dry weather this summer had hit dairy and meat volumes.
So far, the significant financial market disruption in the northern hemisphere was having only a limited effect on the economies of this country%26#39;s trading partners, with the exception of the US, he said.
%26quot;This does not look like unusually weak world growth, and indeed the continued strength of Australia and Asia is an important continued growth driver for New Zealand.%26#39;%26#39;
But the disruption in financial markets had seen funding costs rise and credit conditions tighten in New Zealand and Australia, Dr Bollard said.
New Zealanders were seeing the effects of this through effective mortgage rate rises and reduced corporate credit availability.It would be disappointing if New Zealand businesses slowed quality investment because of credit constraints.
While there had been a lot of pessimistic commentary in the media, the Reserve Bank saw events as a cyclical adjustment, he said.
%26quot;Because we have been so strong so long, some people have forgotten what a slower economy means.%26#39;%26#39;

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Food eats into income

Wednesday, April 16th, 2008

Nine items that families commonly buy rose on average from $30.82 to $38.58 in the past year, food price index figures issued by Statistics New Zealand yesterday show. The rise represents a 25 per cent increase.
The biggest price leap in the trolley was for cheese - $10.69 for a one-kilogram block of mild cheddar this March, up from $6.46 last year. Butter and milk also had significant increases.
Breakfast biscuits, of which Weet-Bix is the most well-known brand, was the only one of the basics to reduce in price, by 30 cents in the past year.
Overall, food prices climbed 6 per cent in the year to March, the most significant increase coming from tomatoes. The biggest increases in the grocery food category came from the staples - cheese, fresh milk and bread.
Food was the biggest contributor to the increase in the consumer price index, also issued yesterday.
Otago University associate professor of human nutrition Winsome Parnell said parents might limit their children%26#39;s consumption of dairy products in the face of price increases.
The danger of rising milk prices was that children were likely to turn to sugary drinks rather than water if their homes ran out of milk. %26quot;Children have sweeter tooths than adults.%26quot;
Soft-drink prices have been rising but Professor Parnell said powdered drinks remained relatively cheap.
The university%26#39;s annual food cost survey, which shows the weekly cost of buying a balanced diet around the country, had not found dramatic increases this year. %26quot;I was very surprised about that … We used the same foods as last year.%26quot;
Increases had been higher in Wellington, however.
Statistics NZ figures show some foods were cheaper in March than a year earlier, including canned spaghetti, canned tuna and apples. But survey statistician Russell Hewitt said no item in the food price index had gone down in price for all of the 12 months.
Finance Minister Michael Cullen said the food price rises were a reminder of the seriousness of current global economic challenges.

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