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Global food prices will ease, but stay high: OECD PDF Print E-mail
Friday, 30 May 2008

AFP, PARIS - High global food prices are a new fact of life, a major report warned on Thursday, even though they should ease from the record levels behind recent widespread hunger protests.

The cost of feeding the family will remain far higher than in the past decade, the report on the outlook for global agriculture over the next 10 years forecast.

The study was published against a background of hunger protests this year in countries in Asia, Africa and the Caribbean in response to a leap in food prices driven largely by growth in some developing countries.

The price surge has added to the number of people in extreme hunger and some humanitarian aid is "urgently required," the OECD said in a joint survey with the UN Food and Agriculture Organization.

The report said that hundreds of millions of people were going hungry before the price increases, but that "the numbers of people suffering from extreme hunger have (now) increased even further."

"In the short term, humanitarian aid for the populations in countries most severely affected is urgently required," the report said.

Several factors had coincided to drive the "exceptional increases in prices" and some of the price pressure would ease in the next few years.

But the two bodies warned that food subsidies and trade protection were not the answer, saying that high prices might even be part of the solution by stimulating neglected investment in agriculture in poor countries.

Raising food supplies in poor countries also depended on improved government, infrastructure and property rights, the Organisation for Economic Cooperation and Development and the FAO said.

The survey also warned that the price surge had endangered the UN Millennium Development Goal of eradicating hunger. And it was strongly sceptical about the benefits of agriculture-based biofuels, a factor behind the price rise.

However, the "transitory nature" of some of the factors behind the recent trend meant that prices would fall from record peaks.

The report pointed to "adverse weather conditions in major grain-producing regions of the world, with spill-over effects on crops and livestock that compete for the same land."

"These conditions are not new. They have happened in the past and prices have come down once more normal conditions prevail and supply responds over time."

The OECD said it saw "no reason to believe that this will not recur over the next few years."

Nevertheless, the report added, commodity prices will continue to be "substantially above" levels that prevailed in the past 10 years.

Comparing the average prices for 2008 to 2017 with 1998 to 2007, beef and pork could be 20 percent higher, wheat, maize and skim milk powder 40-60 percent higher, butter and oilseeds more than 60 percent and vegetable oils more than 80 percent higher, according to the OECD.

The report cited changing diets, urbanisation, rising populations and economic growth as underpinning demand in developing countries.

On underlying policy responses, it said economic development and the structure of agriculture in poor countries had to be improved. A central problem in some countries was low investment in agriculture, research and education. "Expected high farm prices may provide an incentive for this," it said.

"Trade restricting policies -- whether they restrict exports or imports -- have undesirable and often unintended impacts," the study warned.

"On the import side, 'protecting' domestic producers of agricultural commodities by providing high price support and border protection -- including the increasing resort to non-tariff barriers -- restricts growth opportunities for producers abroad and imposes a burden on domestic consumers."

Export taxes and embargoes may provide some short-term relief, but imposed even bigger burdens on domestic producers and also "contribute to global commodity market uncertainty."

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