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Food prices to stay high as oil costs, weather weigh

Food prices to stay high as oil costs, weather weigh
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First Published: Wed, Mar 09 2011. 03 29 PM IST
Updated: Wed, Mar 09 2011. 03 29 PM IST
Bangkok: Global food prices are expected to stay high and volatile throughout the year buoyed by firm oil prices, erratic weather and excessive price speculation, economists and the United Nations said on Wednesday.
Prices of US corn , wheat and soybeans — key ingredients for making food and animal feed — jumped to their highest in 2-1/2 years in recent weeks, while palm oil , which is used widely in cooking, has hit 3-year highs.
Sugar scaled three-decade highs on tight supplies after cyclone damage to crops in Australia, one of the world’s top exporters of the sweetener, and uncertainty over exports from India.
But prices were unlikely to match the record highs scaled in 2008, when the world faced a major food crisis as oil peaked at about $147 a barrel, said Hiroyuki Konuma, UN Food and Agriculture Organisation (FAO) representative for the Asia-Pacific.
“Crude oil prices continue to rise and that would have a lot of impact on food prices, fertiliser prices and raise transportation costs of food,” he told Reuters on the sidelines of a regional meeting on food prices held in Bangkok.
“But it would not rise to the level that happened in 2008 as crude oil prices are still much lower than the level in 2008.”
Global food prices hit a record high in February, triggering fears that more oil price spikes and stockpiling by importers keen to head off popular unrest would hit already volatile cereal markets.
Oil prices were slightly lower on Wednesday at $104.45 a barrel by 0613 GMT, still well below the record high of $147.27 a barrel reached in mid-2008.
Poverty in focus
The Asian Development Bank (ADB) said it was plausible that oil and food prices would rise by 30% from last year for the whole of 2011, a scenario that could slash economic growth in importing countries by as much as 1.5%.
Maria Socorro Bautista, a senior economic adviser for the ADB, said there was a need for greater productivity, investment in agriculture, subsidies for the poor and regional cooperation.
Food inflation in Asia increased an annual 10 percent in January and if the trend continued, Asia could have another 64 million people under the poverty line -- that is those living on less than $1.25 per day — which would also significantly hit consumer spending, she said.
Inflationary concerns are a big issue in Asia and have spread from China and India to the European Union, fed by soaring food prices.
FAO senior economist Abdolreza Abbassian said he expected commodity prices to remain high for the rest of 2011 on tight supply that would lead to high food prices.
“Initially, the situation is tight in all commodities,” said Abbassian.
However, he said rice supply globally remained ample.
“This has been a very positive factor in preventing a food crisis like we have had in the past.”
The FAO urged regional governments to take steps to prevent another round of food supply shortages.
It said there was a need to limit the negative impact of overspeculation and lower restrictions on food exports in major food producing countries.
In the long term, governments should redouble support to farmers by helping cut production costs and push them to grow more food.
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First Published: Wed, Mar 09 2011. 03 29 PM IST
More Topics: Food Price | FAO | Inflation | Oil | Price Rise |