Global food price will ease but stay high

May 29, 2008

Global food prices will ease, but stay high
PARIS - GLOBAL food prices will fall from record peaks in the next few years, but the cost of feeding the family will still be far higher than in the past decade, an international study forecast on Thursday.

The price bubble has added to the number of people in extreme hunger and some humanitarian aid is 'urgently required,' the Organisation for Economic Cooperation and Development (OECD) said in a joint survey with the UN Food and Agriculture Organization (FAO).

But they warned that food subsidies and trade protection are not the answer, saying that high prices might even be part of the solution by stimulating neglected investment in agriculture in poor countries.

Raising food supplies in poor countries also depended on raising the quality of government and improving policies in fields from infrastructure to property rights, the OECD and the FAO said.

The survey also warned that the price surge had endangered the UN Millennium Development Goal of eradicating hunger, and it was strongly sceptical about the benefits of agriculture-based biofuels.

However, the 'transitory nature' of some of the factors behind the recent trend meant that prices would fall from record peaks.

The report pointed to 'adverse weather conditions in major grain-producing regions of the world, with spill-over effects on crops and livestock that compete for the same land'.

'These conditions are not new. They have happened in the past and prices have come down once more normal conditions prevail and supply responds over time.'

The OECD said it saw 'no reason to believe that this will not recur over the next few years'.

Nevertheless, the report added, commodity prices will continue to be 'substantially above' levels that prevailed in the past 10 years.

Comparing the average prices for 2008 to 2017 with 1998 to 2007, beef and pork could be 20 per cent higher, wheat, maize and skim milk powder 40 to 60 per cent higher, butter and oilseeds more than 60 per cent and vegetable oils more than 80 per cent higher, according to the OECD.

The report cited changing diets, urbanisation, rising populations and economic growth as underpinning demand in developing countries.

Hundreds of millions going hungryThe report on the outlook for world agriculture over the next decade, said that hundreds of millions of people were going hungry before the price increases, but that 'the numbers of people suffering from extreme hunger have (now) increased even further'.

'In the short term, humanitarian aid for the populations in countries most severely affected is urgently required,' the report said.

'As suggested recently by the World Bank, aid in the form of cash or vouchers is more appropriate in many cases than commodity shipments, provided supplies can be procured.'

And such aid could be more effective than export taxes or embargoes which were intended to restrain exports so as to ensure domestic supplies, the report said. -- AFP