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World Food Prices Set to Fall

posted on May 30, 2008


PARIS (AP) — World food prices are set to fall from current peaks in the coming years but will remain "substantially above" average levels from the past decade, a report said Thursday.

The world's poorest nations are most vulnerable — particularly the urban poor in food-importing countries — and will require increased humanitarian aid to stave off hunger and undernourishment, according to a joint agricultural report by the Organization for Economic Cooperation and Development and the U.N. Food and Agriculture Organization said.

"Rising prices now translate, unfortunately, as an increase in hunger and civil strife. Uncertainty rules and our people are worried," FAO chief Jacques Diouf told a Paris news conference.

OECD head Angel Gurria, at his side, added: "The end of cheap food in a world where half the population lives with less than two dollars a day is a source of grave concern."

High oil prices, changing diets, urbanization, expanding populations, flawed trade policies, extreme weather, growth in biofuel production and speculation have sent food prices soaring worldwide, trigging protests from Africa to Asia and raising fears that millions more will suffer malnutrition.

"There is a real need to foster growth and development in poor countries and to assist in developing their agricultural supply base," said the report, based on a forecast of the cereals, oilseeds, sugar, meats, milk and dairy products markets for the period 2008 to 2017. It reflects agriculture and trade policies in place in early 2008 and includes an assessment of the biofuels markets for bioethanol and biodiesel.

Despite the prices hikes, general price levels have remained "remarkably stable," suggesting that inflation in the coming decade will "remain low," the report says.

"We do not expect the current price levels to last. But the average of most agricultural commodity prices over the next 10 years will still exceed the average of the previous decade by 10 to 50 percent, depending on the commodity," Gurria said.

Compared with the previous decade, the report said average prices from 2008-2017 for beef and pork will rise 20 percent; sugar around 30 percent; wheat, maize and skim milk powder 40 to 60 percent; butter and oilseeds more than 60 percent; and vegetable oils over 80 percent.

Besides investing in agriculture, the report recommends helping poorer countries diversify their economies and improve governance and administrative systems.

The two international bodies also urged governments to rethink trade-restricting policies such as protecting domestic producers through high price support, export taxes and trade embargoes.

Gurria also called for the "swift and ambitious" conclusion of the Doha trade talks.

"As yields return to normal and farmers respond to higher prices, supply will expand and bring prices down," he said. "That, in turn, will tone down the panic reactions both by market participants and by some governments, which have contributed to exacerbate prices."

"But after the 'spike in the hike' disappears, the more permanent factors will come into play," he said, noting high oil prices and growing biofuel production.

The report says demand for biofuels has boosted demand for grains, oilseed products and sugar at a time when stocks are lower.

Analysis "suggests that the energy, security, environmental and economic benefits of biofuels production ... are at best modest, and sometimes even negative," the report said, urging "alternative approaches."

Internationally, overall food prices have risen 83 percent in three years, according to the World Bank. Part of the increase is the result of adverse weather in major grain-producing regions, with spillover effects on crops and livestock competing for the same land.

Developing countries such as India and China will dominate production and consumption of most commodities by 2017, the report said.

The report assumes a strengthening of the U.S. dollar against most other currencies, which it said will increase incentives to boost domestic production in some countries.

The report also recommends examining the link between climate change and water availability and the effect on production and yield shortfalls, and developing genetically modified organisms "offers potential that could be further exploited," the report says.

Rising food prices, in the absence of adequate regional markets, are increasing food insecurity in Africa, said Ndiogou Fall, president of ROPPA, a network representing farmers from 10 West African nations.

"Agriculture in our countries has been turned into a mine of raw materials for the European food industry," Fall said in a statement from Rome, where he was attending talks led by Italian farmers' group Coldiretti. "Until this logic changes, we won't be able to step out of the crisis."


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