High world food prices here to stay,
the OECD-FAO Agricultural Outlook 2008-2017
By Jon Fernquest |
High food prices are here to stay, according to a report issued this week by two two important international organisations, the FAO and the OECD.
This report, the OECD-FAO Agricultural Outlook 2008-2017, discusses the world food outlook over the next decade.
(Download a free summary of the report)
Rising world food prices have been caused by both supply-side and demand-side factors. Increased food demand from rapidly developing China and India has put upwards pressure on prices.
Other factors have reduced world food supply. The widespread shift to biofuel crops has reduced the quantity of agricultural crops being used for food. A drought in Australia, an important wheat producing area, has also reduced the supply of food crops.
The report suggests that Genetically Modified (GM) crops might help alleviate the shortages.
The poorest are the hardest hit by higher food prices because they spend a higher portion of their income on food. The poorer the country the higher the percentage of income spent on food: United States, Germany (10%), China (27%), developing countries (40-50%), Bangladesh (60%),
This new report was also discussed in the New York Times today.
Here is the Bangkok Post article in full:
Food prices to stay high, "grain drain" fuel blamed
By Brian LoveMay 29, 2008
PARIS, May 29 (Reuters) - Food prices will remain high over the next decade even if they fall from current records, meaning millions more risk further hardship or hunger, the OECD and the UN's FAO food agency said in a report published on Thursday.
Beyond stating the immediate need for humanitarian aid, the international bodies suggested wider deployment of genetically modified crops and a rethink of biofuel programmes that guzzle grain which could otherwise feed people and livestock.
The report, issued ahead of a world food summit in Rome next week, said food commodity prices were likely to recede from the peaks hit recently, but that they would remain higher in the decade ahead than the one gone by.
Beef and pork prices would probably stay around 20 percent higher than in the last 10 years, while wheat, corn and skimmed milk powder would likely command 40-60 percent more in the 10 years ahead, in nominal terms, it said.
The price of rice, an Asian staple expected to become more important also in Africa in the years ahead, would likely average 30 percent more expensive in nominal terms in the coming decade than over the 1998-2007 period.
"In many low-income countries, food expenditures average over 50 percent of income and the higher prices contained in this outlook (report) will push more people into undernourishment," the report said.
Millions of people's purchasing power across the globe would be hit, said the report, co-produced by the Food and Agriculture Organision, the U.N. food agency in Rome, and the Organisation for Economic Co-operation and Development in Paris.
The cost of many food commodities has doubled over the last couple of years, sparking widespread protests and even riots in some of the worst affected spots, such as Haiti.
Many factors, including drought in big commodity-producing regions such as Australia, explained some of the acceleration in prices, as did growing demand from fast-developing countries such as China and India, the report said.
GRAIN DRAIN
But it singled out the big drive to produce biofuels as an alternative to fossil fuels, a push the U.S. government is sponsoring heavily, and Europe as well.
"Biofuel demand is the largest source of new demand in decades and a strong factor underpinning the upward shift in agricultural commodity prices," said the report, adding it was time to consider alternatives.
The benefits at environmental and economic level as well as in terms of energy security were "at best modest and sometimes even negative", the report said.
Under U.S. plans, about a quarter of the U.S. corn crop will be channelled into ethanol production by 2022 while the European Union is also aiming for as much as 10 percent of road transport fuel to be produced using crops by 2020. While it was hard to always identify exactly how much retail food prices were affected by food commodity prices, the direct impact was clearer in poorer countries where there is less of the value-added, packaged and processed food that is consumed more in wealthy regions, the report said.
The proportion of total funds that households use to pay for food varies hugely, from more than 60 percent in Bangladesh, to 40 or 50 percent in many other developing countries, and just 10 percent in the United States or Germany, or 27 percent in China, the report said.
It also highlighted the impact of financial investors in the commodities futures markets, saying this added upwards pressure on prices in the short term but that the jury was still out as to the long-term impact, beyond generating greater volatility. REUTERS
(Source: Bangkok Post, business, 30-05-08, page B6, Brian Love, Reuters, temp-link)
Vocabulary:
Food and Agriculture Organision (FAO) - the United Nations agency dealing with food and agriculture worldwide (See Wikipedia)Organisation for Economic Co-operation and Development (OECD) - an international organisation of thirty countries that accept the principles of representative democracy and free market economy: Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States, Japan, Finland, Australia, New Zealand, Mexico, Czech Republic, South Korea, Hungary, Poland, Slovakia (See Wikipedia)
here to stay - will not be changing, is permanent
the outlook - what will likely happen in the future, the prospects
hardship - situation when life is difficult and unpleasant
an immediate need - something that you need now
a humanitarian crisis - an event that threatens the health and well-being of a large group of people, including natural disasters, epidemics, famine, and warfare (See Wikipedia)
humanitarian aid - aid to save lives and alleviate suffering in a humanitarian crisis like the recent cyclone in Burma, different than long-term development aid (See Wikipedia)
deployment - preparing a resource so that it is ready to be used (See glossary)
Genetically Modified crops (GM crops) - food crops made from "genetically modified organisms (GMO) that have had their DNA altered through genetic engineering. GM foods were first put on the market in the early 1990s. The most common modified foods are derived from plants: soybean, corn, canola, and cotton seed oil...Controversies surrounding GM foods and crops commonly focus on human and environmental safety, labeling and consumer choice, intellectual property rights, ethics, food security, poverty reduction, and environmental conservation." (See Wikipedia on genetically modified food)
deployment of genetically modified crops -
biofuel - fuel made from agricultural crops such as sugar, corn, or palm oil (See Wikipedia)
fossil fuels - Oil, coal and natural gas
guzzle grain - use lots of grain
a summit - meeting between leaders of countries to discuss important issues
recede from the peaks hit recently - went up suddenly (a spike) and then went down slowly
skimmed milk powder - powdered milk that can be stored longer and does not need to be refrigerated (See Wikipedia on powdered milk)
in nominal terms - the actual price before adjusting for inflation (for comparison of prices at different times, it is better to compare real prices without the cumulative effects of inflation (See Economist glossary)
a staple, a food staple - an important food in everyday life
undernourishment, malnutrition - when the quantity and quality of food is not sufficient, over long periods resulting in starvation, disease, and infection (See Wikipedia)
purchasing power - how much you can buy with your money, inflation decreases purchasing power
a drought - when there is no water because there is no rain (See Wikipedia)
singled out - choose one person from a group and give them special attention
a drive to Y - a campaign to do Y, a special effort by a group to achieve purpose Y
drive to produce biofuels - efforts to produce biofuels, the campaign to produce biofuels
government sponsoring - supporting financially, paying the expenses of
X underpins Y - X is an important basic part of Y, necessary for continued existence
strong factor underpinning the upward shift - an very important cause of the upward shift
consider alternatives - think about other possible ways to do something
security - protecting from danger (See glossary)
energy security - protecting from the danger of not having enough energy
value-added - the value added to a product by a firm
value-added, packaged and processed food - teh value added to food by processing and packaging it (for example, frozen vegetables which you can keep in your regrigerator for a long time)
the jury was still out - have not yet decided whether it is a good or bad thing
volatility - the tendency to change suddenly and unexpectedly, the amount by which the price of a security swings up and down, a measure of risk (See the Economist glossary and glossary)
generating greater volatility - creating greater sudden and unexpected movements
