Food Costs Could Crimp Global Growth

The reason for this round of food price inflation is a growing urban middle class in emerging-market countries and increased mandates for the use of clean fuels such as ethanol, which is made from corn of sugar cane.

While shareholders in emerging-market ETFs such as the FTSE Xinhua 25 Index (FXI Quote), the MSCI Emerging Markets Index (EEM Quote), the iShares Brazil (EWZ Quote), and the iShares Taiwan (EWT Quote) have enjoyed substantial gains in the past year, the increased consumption that is fueling such economies' growth is also raising costs globally.

For example, while Pakistan's ministry of finance announced last week that consumer price index-based inflation was down on the year ended Feb. 28 from 8.05% to 7.4%, even the country's efforts to tighten monetary policy couldn't keep food inflation from surging 2.7% over the last year to 10.3%.

Furthermore, after years of keeping global inflation down with its masses of cheap labor, China is now beginning to export inflation with its growth, says Urquhart-Stewart. "Over the past years, China has net absorbed inflation with its deflation," he says. "China is now exporting inflationary pressure, and costs are no longer falling."

One main way it is exporting that inflation is in food products.

Just as the slump in China's Shanghai Composite Index in February had repercussions in the U.S. markets, so too might this export of inflation.