Paris: The surge in prices for farm products over the past year has increased inflation concerns in many developing countries, a study said on Wednesday.
The study, co-written by the Organization for Economic Cooperation and Development (OECD) and the United Nations’ Food and Agriculture Organization (Fao), said although a large part of the rise in prices was due to strong demand for non-farm products, more pressure was being felt through higher demand for food products.
“This pressure can be either direct, through growing demand and changes in consumption patterns as incomes rise, or indirect as alternative uses of food crops, such as inputs for biofuels, have led to higher domestic prices,” the study said.
The study cited India where inflation rates above 6% have led to both fears of an overheating economy and concerns that surging demand for wheat would continue to exceed supply.
The surge in demand for grains, oilseed and sugar to make biofuels, combined with growing demand from developing countries and a drop in world stocks to historically low levels, have sent prices rocketing around the globe.
In the US and Europe, wheat prices have gained more than 30% over the last three months and are now at levels unseen for more than 10 years.
The steep climb in food costs, which economists have termed “agflation”, also hit other commodities such as milk, livestock, coffee and cocoa on a combination of robust global demand and weather jitters. In their outlook for 2007-16, OECD and Fao said they did not expect the rise to reverse in the next decade and that it would most hurt developing countries as well as the poor in urban populations.