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UN warns of another food crisis

Mar 14 2011 13:17 Reuters

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Abu Dhabi - Surging global prices of basic foodstuffs raise the risk that the food crisis of 2007/2008 in developing countries will be repeated, the head of the United Nations Food and Agriculture Organisation (FAO) said on Monday.

A jump in oil prices and the fast recent drawdown in global stocks of cereals could herald a supply crisis, FAO director general Jacques Diouf told Reuters in an interview during a visit to the United Arab Emirates.

"The high prices raise concern and we've been quickly drawing down stocks," he said. "For years we have warned that what is needed is more productivity and investment in agriculture."

The most recent UN Food Price Index showed prices have risen to the highest levels since at least 1990, when the index began.

Diouf said until recent months, global stocks of cereals were at much healthier levels than the dwindling supplies that set off a crisis in 2007 and 2008.

Last July, inventory levels were a healthy 100 million tonnes higher than during that crisis, but rapid economic growth in developing countries, and a return to growth in highly industrialised economies, has led to new drawdowns.

A number of countries in north Africa and the Middle East have made big grain purchases to head off the sort of unrest, partly fuelled by food prices, which has toppled the leaders of Tunisia and Egypt.

South Korea is looking to build a strategic grain reserve and is planning to buy cargoes of corn and another staples, joining similar efforts by other Asian nations worried about high food prices and social unrest. "It is a rational thing to do, to cover yourself," Diouf said.

The recent surge in oil prices, which rose to nearly $120 per barrel in late February, is contributing to higher food prices that may crimp developing countries' ability to cover food import needs, as it raises the price of both transportation and agricultural inputs, Diouf said.

Biofuels

The FAO has been advising developed countries to reexamine their biofuels strategies - which include large subsidies - since these have diverted 120 million tonnes of cereals away from human consumption to convert them to fuels.

"We've been advising member countries to revisit these policies," Diouf said. "Relying on more renewable energy does not mean you have to make more biofuels."

Diouf said avoiding a return to food crisis hinges on crop yields in the next harvest season, as well as how economic growth impacts demand. But he also said rising food and oil prices could have a detrimental effect on growth.

It was too early to determine whether Japan's recent earthquake and tsunami will have any effect on global supply or demand of agricultural products, Diouf added.
fao  |  inflation  |  food prices
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