OECD, FAO predict higher food prices over next decade

Both the OECD and FAO on Tuesday predicted an increase of food prices over the next decade, amid persistent concerns over food security.

The prediction was made jointly by the Paris-based Organization for Economic Cooperation and Development and the UN Food and Agriculture Organization.

In their joint annual Agricultural Outlook 2010-2019, the OECD and FAO said that though food prices have fallen from their record peaks two years ago, average wheat and coarse grain prices over the next 10 years will be between 15 and 40 percent higher in real terms, excluding inflation, than the levels during the 1997-2006 period.

Based on the same comparison, real prices of vegetable oils are expected to be more than 40 percent higher, and dairy prices are projected to be between 16 and 45 percent higher.

Livestock prices over the coming decade are not expecting a big rise, although world demand for meat is climbing faster as increasing wealth in some emerging economies alters diet habits.

The OECD-FAO outlook predicted a slower growth in global agriculture output compared with the past decade, but the overall production will meet the market requirements of 2050.

As the fastest growing agricultural producer, Brazil expects an output rise of more than 40 percent between now and 2019, while production growth is also expected to be well above 20 percent in China, India, Russia and Ukraine.

Given the one-billion undernourished population and the uneven food supply situation across the world, the two organizations voiced concerns about food security on the world level.

"Recent price spikes and the economic crisis have contributed to a rise in hunger and food insecurity," the joint report said.

"Higher food costs, if sustained, will undermine food security, especially for the poor who spend a significant share of their budgets on food."

The OECD-FAO outlook argues that agricultural production and productivity need to be "stepped up," while a well functioning, rules-based trading system is crucial to fair competition and to ensuring food transfer from surplus- to deficit-production areas.

Furthermore, the OECD and FAO proposed that policy-makers be alert about price volatility, as recent uneven stocks and variation in oil prices have unsettled agricultural commodity markets.

It was fortunate that there was no conclusive evidence yet to indicate long-term price volatility, the report added.

"The agriculture sector has shown resilience to recent price shocks and the economic downturn. On the whole, this year's outlook is cautiously more positive than in recent years," said OECD Secretary-General Angel Gurria while presenting the outlook in Rome, with FAO Director-General Jacques Diouf.

But for the long run, governments should guarantee farmers' interests by helping them to better manage future risks, Gurria added.

[Source: Xinhua, Paris, 15Jun10]

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