High and volatile food prices loom, UN food agency warns

Agricultural commodity prices are likely to keep rising in the months ahead as the volatility in global commodity markets continues, the United Nations Food and Agriculture Organization (FAO) warned today in its latest report, forecasting an increase of over two per cent in this year’s world food import bill compared with last year.

“Amid political uncertainties and surging energy prices, agricultural markets over the past year have also had to confront abnormal incidences of natural disasters, ranging from devastating hurricanes to fast spreading animal diseases,” according to the June issue of FAO’s Food Outlook report.

“Based on current indications, several agricultural commodities are likely to experience still more unstable months ahead and, in most instances, the fundamentals point to even further gains in prices.”

FAO is forecasting an increase of over two per cent in the world food import bill in 2006 compared to 2005. The increase is expected to be strongest for cereals and sugar and smallest for meat. And, given their higher share as importers of food and feed, the developing countries’ bill is forecast to grow by 3.5 per cent, while that of low-income food-deficit countries is forecast to jump by nearly 7 per cent.

According to the report, a 10 million tonne decrease in world wheat production is forecast this year, with a strong demand outlook set to drive up world trade in 2006/07 to 110 million tonnes. The world balance sheet for 2006/07 is expected to show a sharp drop in ending stocks as well as a decline in the stocks-to-use ratio to 25 per cent, the lowest in over three decades.

Turning to coarse grains, which include corn and barley, the FAO also noted that “international prices have started to strengthen in recent months,” adding that on current production indications, the new season’s supply and demand balance will be tight.

Focusing on sugar, the report highlighted that world prices reached their highest level in 25 years in February, and forecast that they would “remain firm at current levels” for the rest of the year.

Regarding meat markets, the report noted that after a brief recovery in 2005, global markets have again been unsettled by animal disease concerns this year, forecasting that expectations of the lowest meat consumption gains in 25 years, uncertain price prospects and escalating trade restrictions in 2006 are expected to limit global meat output to 272 million tonnes.

In a separate development related to food security, the FAO today stressed the importance of the Treaty on Plant Genetic Resources for Food and Agriculture, which aims to safeguard the genetic diversity of crops, a heritage of crucial importance to future generations.

The Treaty is a legally binding instrument negotiated by FAO’s member States, which came into force in June 2004, and its Governing Body will hold its first meeting in Madrid on next week, with a ministerial meeting on 13 June.

“This international agreement not only guarantees the conservation and sustainable use of plant genetic resources, but also the fair and equitable sharing of benefits arising out of their use, including any monetary benefits of commercialization,” said José Esquinas Alcázar, who, since 1983, has been the Secretary of the FAO Commission on Genetic Resources for Food and Agriculture.

In a further development today, this time focusing on a specific area of the world, FAO Director-General Jacques Diouf opened the Organization’s Regional Conference for Europe, being held in Riga, Latvia, by calling for economic growth in rural areas of the Balkans and the Community of Independent States (CIS).

“The European Union can play a fundamental role in improving the welfare of the countries of the Balkans and the Community of Independent States (CIS), especially of their rural populations, by facilitating the integration of trade. This is particularly important for agriculture,” he told the meeting, which runs through Friday.

The Director-General indicated that the agricultural sector dominated the economies of most countries of Central and Eastern Europe and the CIS, and thus played a key role in food security by providing livelihoods to the majority of the population, but he said the sector could be improved.

“The lasting solution for the improvement of agricultural performance in the countries of the region lies largely in the transformation of agriculture through national agricultural research systems able to generate and transfer productivity-enhancing and market-oriented technologies.”