Governments are now stockpiling food staples.

Governments across the developing World are stockpiling food staples in an attempt to contain panic buying, inflation and social unrest.

But the hoarding is driving agricultural commodity prices higher. The cost of Wheat, the World's most important staple, reached a fresh two-and-a-half-year high Thursday, after countries from Algeria to Saudi Arabia announced extraordinary purchases.

High food prices have been a contributing factor to the recent wave of social unrest across North Africa and the Middle East. In Algeria earlier this month, young rioters chanted Bring us sugar! The cost of the sweetener in the wholesale market is at its highest in 30 yrs.

Earlier this week, Algeria bought 800,000 tonnes of Wheat, and Saudi Arabia announced plans to double the size of its Wheat stockpile.

Bangladesh and Indonesia joined the rush on Thursday, placing extraordinary on Rice orders. Traders said that Jakarta, which usually buys rice in 200,000-tonne allotments, tendered for more than 800,000 tonnes. Bangladesh said it would double rice purchases this year.

In the short term that was likely to mean an increase in the land on which 2 crops a year are planted, and in the longer term increasing the productivity of farming in developing countries.

But Cargill believes agricultural prices are likely to remain very volatile because the prospect of higher prices encourages short-term additional demand and stock building, amplifying any price moves. And further supply disruption either from poor weather or from countries extending export bans could lead to temporarily extreme high prices.-Paul A. Ebeling, Jnr. www.livetradingnews.com

The United Nations Food and Agricultural Organisation said record food prices in December were 25 per cent higher than a year earlier.

The warning follows a key world Food Price Index reaching a record 215 points in December, up 4 per cent from November and one point above its previous record during the food crisis in 2008.

Meat and Livestock Australia chief economist Tim McRae said demand was growing steadily for lamb, beef, pork and chicken as the world economy recovered after the Global Financial Crisis.

Here are the must own stocks as Food Prices keep rising

Olam International, Noble Group, Wilmar International

Singapore listed commodities companies are set to become the rising stars of the exchange in 2011 and will become global players of significant importance.
Olam International Ltd, Wilmar International Ltd and Noble Group Ltd are most likely to lead the charge as the benefit from home grown markets in ASEAN, China and India, where the world's largest populations are consuming more and more of the world's food supply.

Cash Flow is on the rise at Noble and Olam, both have successfully made the switch into production from trading, have been expanding ever since.
Olam is the world's largest supplier of cashews and sesame seeds, and is among the biggest sources of cocoa, rice, peanuts and cotton. It operates in 64 countries.

Noble is Asia's biggest supplier of raw materials. Only 22 percent of its revenue comes from agriculture, with the remainder coming from materials such as iron ore.

It has invested heavily in mines and processing.

Wilmar is Asia's leading agribusiness group and the world's largest integrated palm oil company.

Golden Agri-Resources Ltd is the world's second largest palm oil plantation with a total planted area of 435,000 hectares (including small holders) as at 30 September 2010, located in Indonesia. It has integrated operations focused on the production of palm-based edible oil and fat products.

Demand is expected to grow because of demand for biofuels, which is part of the reason the company bought the sugar and renewable energy businesses from Australia's CSR.