Food Prices High Despite Record Cereal Crop

Financial Crisis Likely To Keep Food Prices High Despite Record Cereal Crop – UN

New York, Nov 6 2008 10:10AM

Even though global cereal production is expected to hit a new record this year, the United Nations Food and Agriculture Organization (FAO) is cautioning that the impact of the current financial crisis on the agricultural sector could mean a surge in food prices in the coming year.

In its bi-annual “Food Outlook,” FAO noted that much of the boost in cereal production took place in developed countries, where farmers were in a better position to respond to high prices.

Developing countries, on the other hand, were largely limited in their capacity to respond to high prices by supply side constraints on their agricultural sectors.

Concepcion Calpe, one of the main authors of the report, said this year’s record cereal harvest and the recent fall in food prices should not create a false sense of security.

“For example, if the current price volatility and liquidity conditions prevail in 2008/09, plantings and output could be affected to such an extent that a new price surge might take place in 2009/10, unleashing even more severe food crises than those experienced recently,” she said.

“The financial crisis of the last few months has amplified downward price movements, contributed to tighten credit markets, and introduced greater uncertainty about next year’s prospects, so that many producers are adopting very conservative planting decisions.”

FAO pointed out that the surge in food prices over the past year has increased the number of undernourished people in the world to an estimated 923 million, and this number could grow.

“There is a real risk that as a consequence of the current world economic problems people will have to reduce their food intake and the number of hungry could rise further,” said Ms. Calpe.

To feed a world population of more than nine billion people by 2050 (around six billion today), global food production must nearly double, according to FAO. This requires addressing a number of challenges related to agriculture, including land and water constraints, low investments in rural infrastructure and agricultural research, expensive agricultural inputs, and little adaptation to climate change.

It also requires more investments in agriculture, machinery, tractors and water pumps, as well as more skilled and better-trained farmers and more efficient supply chains.

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