Post date: Jan 05, 2011 5:50:21 PM
A United Nations' food agency economist says prices of corn, wheat and other grains may go much higher and, alongside worrying weather patterns, could lead to a massive strain on poorer countries.
DARFUR, SUDAN (FILE - 2008) WFP - Prices of corn, wheat and other grains can go much higher and current weather patterns are a concern, the United Nations' food agency said on Wednesday (January 5) after announcing its food price gauge hit a record high in December.
Its measure of monthly price changes for a food basket of cereals, oilseeds, dairy, meat and sugar reached its highest since records began in 1990, topping levels in 2008 when a food crisis sparked riots in some countries.
A mix of high oil and fuel prices, growing use of biofuels, bad weather and soaring futures markets pushed up prices of food in 2007/08, prompting violent protests in countries including Egypt, Cameroon and Haiti.The Food and Agriculture Organisation's economist Abdolreza Abbassian told Reuters that the FAO was worried by the high price of grain, and crop production had been detrimentally affected by the unpredictability of current weather activity. The FAO said grain prices were unlikely to decrease in the near future, if at all.
''It has not only been prolonged but its intensity has increased," Abbassian said.
"This is certainly a concern for an organisation such as FAO where our real responsibility is to look after how the poorer countries and the countries which are food insecure would have to basically deal with situations like we have today," he added.
Abbassian said that despite high prices, many factors that triggered the sometimes deadly food riots in 2008, such as weak output in poor countries and a sudden surge in crude oil prices, were not currently present, reducing the risk of more turmoil.
But he said the FAO was concerned that countries would feel if they had survived the crisis of 2007/8 they could survive anything.
"So this is really the concern we have here, that people look at the past and they say, well in the past prices rose very fast and they came down very fast, even in 2007/8," Abbassian said.
"Well situations have changed, the supply and demand structures have changed. And certainly the kind of weather developments we have seen makes us worry a little bit more, that it may last much much longer and are we prepared for it, really this is the question. And I think the December number, highlighting further strength, further firming of prices simply underpins this concern," he added.
Prices of grains surged in 2010, with wheat buoyed by a series of weather events including drought in Russia and its Black Sea neighbours. European wheat prices doubled, U.S. corn rose more than 50 percent while U.S. soybeans jumped 34 percent.
Low stocks of grains such as corn mean that more weather-related damage to crops could be critical for markets. China in particular has a huge appetite for corn and is keen to secure adequate stocks of the grain.