Market News

 June 17, 2010
Enjoy it while you can - food prices are going to rise

 Global prices of food could climb by as much as 40 per cent in the coming decade, as the global population continues to surge, a new United Nations Food and Agriculture Organization (FAO) report released today says.

The Agriculture Outlook 2010-19 anticipates that wheat and coarse grain prices could jump to levels of between 15 and 40 per cent higher than they were between 1997 and 2006, while vegetable oil and dairy prices are also projected to rise by more than 40 per cent.

Spikes in livestock prices are not expected to be as marked, even in the face rising global demand for meat which is set to outpace demand for other commodities as some segments of the population in emerging economies alter their dietary habits due to increased wealth.

The report, jointly published with the Organization for Economic Cooperation and Development (OECD), notes that global agricultural output will ease in the next decade, but food production will meet the demand generated by surging population growth by 2050.

However, even if enough food is produced to feed the world's people, recent price spikes and the economic crisis have resulted in stepped-up hunger and food insecurity, with some one billion people now believed to be undernourished.

The publication calls for enhanced agricultural production and productivity as well as a well-functioning, rules-based trading system to spur fair competition and ensure that food can move from surplus to deficit areas.

"The role of developing countries in international markets is growing quickly, and as their impact grows, their policies also have an increasing bearing on conditions in global markets," FAO Director-General Jacques Diouf said at the report's launch in Rome.


As a result, these nations' role and contribution is global policy is crucial, he stressed, urging a more global scope to discussions on fighting hunger and malnutrition.

Climate change: There is a broad scientific consensus that less-resilient agricultural production areas will suffer the most, as temperatures rise further, for example in semitropical and tropical latitudes, and as already dry regions face even drier conditions. Climate change may also increase food safety risks that might result from heat-related and water borne diseases with temperatures rising and more flooding. Production variability and uncertainty of supplies are expected to rise as a result of likely increases in the frequency of extreme events such as droughts and floods. In more extreme cases, production zones might shift. It was also recognised that agriculture will be required to make an important contribution to reducing greenhouse gas emissions.

Average crop prices over the next ten years for the commodities covered in this Outlook are projected to be above the levels of the decade prior to the 2007/08 peaks, in both nominal and real terms (adjusted for inflation).

Average wheat and coarse grain prices are projected to be nearly 15-40% higher in real terms relative to 1997-2006, while for vegetable oils real prices are expected to be more than 40% higher. World sugar prices to 2019 will also be above the average of the previous decade but well below the 29-year highs experienced at the end of 2009.

Source: www.un.org