(Reuters) - Record food prices will hit the world's poorest hardest, raising the risk of riots, export bans, foreign-owned farmland expropriation and further price spikes fueled by short-term investors. The UN Food and Agriculture Organization said on Wednesday food prices hit a record high in December and could rise further on erratic global weather patterns. For the first time they outstripped levels reached in early 2008, when spiraling prices prompted riots in countries including Haiti, Egypt and Cameroon and brought demands for tighter commodity market regulation. The potential humanitarian, political and business impact -- particularly in impoverished states where food makes up the largest component of the inflation basket -- is already alarming policymakers and senior officials. "Food price increases impact the poor hardest as food is a higher proportion of their incomes," said James Bond, chief operating officer of the World Bank's political risk insurance arm the Multilateral Investment Guarantee Agency (MIGA). "It creates significant tension in poorer countries, exacerbates standard of living disparities and is a major source of unrest."The 2008 price spike came to an abrupt end in September that year with the global crash that followed the demise of Lehman Brothers, sucking borrowed money out of markets as lenders called in their debts.But right now, no one expects that to happen again. So far, experts say weather-related supply shocks -- floods in Australia, drought in Argentina, dry weather and fires in Russia and potentially crop damaging frosts in Europe and North America -- were largely to blame. But they worry politics and markets could soon take over to produce a vicious circle.
"The danger is that what happens now is that you get a second shock as countries can respond by imposing export bans and financial markets investors pile in for short-term investment, pushing prices much higher, as they did in 2008,"
said Maximo Torero, divisional director for markets, trade and institutions at Washington DC's International Food Policy Research Institute (IFPRI).