November 18, 2010

Food Import Prices Soaring, UN Agriculture Agency Warns

Food import bills for the world's poorest countries are predicted to increase by 11 percent this year, and unless the production of key crops increases by a sizable margin in 2011, the UN Food and Agriculture Organization (FAO) warns that things could get significantly worse.

"International prices of most agricultural commodities have increased in recent months, some sharply," the FAO reports in the November 2010 edition of their Food Outlook Global Market Analysis Report. The organization's Food Price Index jumped 34 points since June, and the current measure of 197 points is just 16 points shy of its all-time high, set in June 2008.

The FAO said that several factors played key roles in the price increases. Among those factors were crop shortages in the top producing countries, weather conditions, and the decreasing value of the US Dollar.

According to UN food agency statistics, worldwide production of cereal crops is expected to fall by 2 percent, despite predictions in June that it would increase by 1.2 percent. As a result, the FAO predicts that global cereal stocks will likely decrease by 7 percent.

"Following a series of unexpected downward revisions to crop forecasts in several major producing countries, world prices have risen alarmingly and at a much faster pace than in 2007/08," the FAO report stated. "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."

Replenishing cereal stocks could be difficult due to other factors, the FAO reports. The price of sugar has reached a 30-year high, they say, and increased prices for products such as soybeans and cotton make them attractive crops to grow, thus limiting the amount of rice, barley, and other cereal crops that can and will be grown by farmers.

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

Furthermore, according to China's Xinhua News Agency, international food import bills could surpass the $1 trillion mark in 2010, and low-income food-deficit countries could see total costs soar by one-fifth.


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