Global food prices will remain high

by Bryan Salvage
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ROME – High and volatile agricultural commodity prices are likely to remain for the rest of 2011 and into 2012, according to the latest analysis published in the Food and Agriculture Organization of the United Nations’ (FAO's) biannual Food Outlook. A sharp rundown on inventories and only modest overall production increases for most crops are cited as reasons for continuing strong prices.

High feed prices, disease outbreaks and depleted animal inventories were forecast to limit the expansion of global meat production to 294 million tonnes in 2011 — only 1 percent more than in 2010. In May 2011, the international meat price index hit a new record at 183 points and a combination of strong import demand and limited export availability pointed to a further firming of prices in the next few months.

The next few months will also be critical in determining how the major crops will fare this year, the report stated. Although prospects are encouraging in some countries, weather conditions featuring too little and in some cases too much rain could hamper maize and wheat yields in Europe and North America.

"The general situation for agricultural crops and food commodities is tight with world prices at stubbornly high levels, posing a threat to many low-income food deficit countries," said David Hallam, director of FAO's Markets and Trade Division.

International food prices, which earlier this year soared to levels seen in the 2007-8 food crisis, dropped a modest 1 percent in May. The FAO Food Price Index averaged 232 points in May from a revised estimate of 235 points in April but was still 37 percent above May 2010.

Declines in international prices of cereals and sugar were responsible for the slight decrease in the May index, more than offsetting increases in meat and dairy prices.

Current prospects for cereals in 2011 point to a record harvest of 2,315 million tonnes — a 3.5 percent increase over 2010, which marked a 1 percent drop compared to 2009.

World production of coarse grains is set to increase 3.9 percent, exceeding the record set in 2008. Most of the increase is expected from the Russian Federation and the other members of the Commonwealth of Independent States (CIS).

Following two consecutives years of low prices, fish markets have rebounded this year. Production in 2011 is heading to a record, but prices are likely to be supported by strong demand from the developing countries.

In international food trade, the global food import bill is expected to reach a new record of $1.29 trillion in 2011 — 21 percent more than in 2010. Low-Income Food Deficit Countries (LIFDCs) and Least Developed Countries (LDCs) would be hardest-hit since they would likely have to spend respectively 27 and 30 percent more on food imports than last year. Expenditures on imported foodstuffs for vulnerable countries could account for roughly 18 percent of their total import bills compared to a world average of around 7 percent.
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