THE world could face a food crisis similar to 2007-08’s if countries restrict exports on concern over a drought-fuelled grain price rally, the United Nations food agency warned yesterday, after reporting a surge in global food prices last month.
A mix of high oil prices, growing use of biofuels, bad weather, soaring grain futures markets and restrictive export policies pushed up prices of food in 2007-08, sparking violent protests in several countries.
Concern about extreme hot and dry weather in the US Midwest sent maize and soya bean prices to record highs last month, driving overall food prices higher and reversing the Food and Agriculture Organisation’s (FAO’s) forecast for price declines this year.
"There is potential for a situation to develop like we had back in 2007-08," FAO senior economist Abdolreza Abbassian said. "There is an expectation that this time around we will not pursue bad policies and intervene in the market by restrictions, and if that doesn’t happen we will not see such a serious situation as 2007-08. But if those policies get repeated, anything is possible."
Several major producers imposed restrictions on exports in an attempt to control domestic prices in the 2007-08 crisis, including outright bans, quotas and higher tariffs on exports of foods including rice, maize and wheat. The restrictions reduced supply on world markets, driving prices even higher.
Grain markets were boosted recently by speculation that Black Sea producers, particularly Russia, might impose grain export restrictions after a drought.
Markets drew comfort from comments by Russia on Wednesday that it saw no grounds to ban grain exports this year, but it did not rule out protective tariffs next year.
The FAO food price index, which measures monthly price changes for a food basket of cereals, oil seeds, dairy, meat and sugar, averaged 213 points last month, up 6% from 201 points in June, the FAO said in its monthly index update.
The rise, which followed three months of declines, was driven mainly by a surge in grain and sugar prices, while meat and dairy prices were little changed, the FAO said.
It said the US drought, the worst to hit the Midwest in 56 years, had pushed up maize prices by almost 23% last month, and international wheat prices had followed, rising about 19% amid worsening output prospects.
Although below a peak of 238 points in February last year, when high food prices helped to drive the Arab Spring uprisings in the Middle East and North Africa, the index is still higher now than during the food price crisis in 2007-08.
Higher food prices mean higher import bills for the poorest countries, which do not produce enough food domestically, and a strong dollar would deepen that effect.
The charity Oxfam said the surge in prices could drag millions of people around the world into conditions of hunger and malnourishment.
"The very strong appreciation of the dollar, and the surge in prices, is basically a double blow which is going to be quite stressful for some of the more fragile countries," Mr Abbassian said.
But the situation was quite different from 2007-08, when crude oil prices were at record levels, adding to farmers’ costs. "What is quite certain is that it is not going to be a season where prices fall below the previous year, which is what we had anticipated. It is going to be another season of very high prices."
Reuters
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