UN warns: Food prices soar in 2010, higher in 2011

International food import bills could pass the one trillion dollar mark in 2010 with prices of most commodities up sharply

In the latest edition of its Food Outlook report, the United Nations Food and Agriculture Organization (FAO)  warned the international community to prepare for harder times ahead unless production of major food crops increases significantly in 2011.

Food import bills for the world’s poorest countries are predicted to rise 11 percent in 2010 and by 20 percent for low-income food-deficit countries.

This means, by passing a trillion dollars, the global import food bill will likely rise to a level not seen since food prices peaked at record levels in 2008.

“With the pressure on world prices of most commodities not abating, the international community must remain vigilant against further supply shocks in 2011 and be prepared,” FAO said.

The FAO Food Price index has gained 34 points since June, and is now only 16 points short from its peak in June 2008, when rising process sparked food riots in dozens of countries.

Weather partly to blame

Contrary to earlier predictions, world cereal production is now forecast to contract by two percent rather than to expand by 1.2 percent as anticipated in June. Unexpected supply shortfalls due to unfavourable weather events were responsible for this change in direction, according to the report.

Global cereal stocks are forecast to decline sharply and Food Outlook makes a strong call for production to be stepped up to replenish inventories. World cereals stocks are anticipated to shrink by seven percent according to FAO, with barley plunging 35 percent, maize 12 percent and wheat 10 percent.

Only rice reserves are foreseen to increase, by six percent according to the report.

Consumers to pay

“Given the expectation of falling global inventories, the size of next year’s crops will be critical in setting the tone for stability in international markets,” FAO said. “For major cereals, production must expand substantially to meet utilization and to reconstitute world reserves, and farmers are likely to respond to the prevailing prices by expanding plantings.

“Cereals however may not be the only crops farmers will be trying to produce more of, as rising prices have also made other commodities attractive to grow, from soybeans to sugar and cotton.

This could limit individual crop production responses to levels that would be insufficient to alleviate market tightness. Against this backdrop, consumers may have little choice but to pay higher prices for their food,” FAO warned.

Price increases, seen for most agricultural commodities over the past six months, are the result of a combination of factors, especially unexpected supply shortfalls due to unfavourable weather events, policy responses by some of the exporting countries, and fluctuations in currency markets.

International prices could rise even more if production next year does not increase significantly – especially in maize, soybean, and wheat, FAO said in its report.

Even the price of rice – the supply of which according to FAO is more adequate than other cereals – may be affected if prices of other major food crops continue climbing.

Posted in Food and Farming
Comments are closed.