FRANCE: May 30, 2008


PARIS - 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 June 3-5 world food summit in Rome, 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.

"It's time for action," Jacques Diouf, head of the United Nations Food and Agriculture Organisation told a news conference in Paris, saying he expected 40 leaders in Rome for a summit on what should be done immediately and for long-term food security.

"There's an immediate need for humanitarian aid to avoid poor people going hungry," added Angel Gurria, head of the Organisation for Economic Co-operation and Development.

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, the joint FAO/OECD report 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, which highlighted that prices were set to remain higher not just in nominal terms but when adjusted to take account of inflatin as well.

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 US government is sponsoring heavily, and Europe as well.

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.

"I'm saying it's time for a serious review," said Gurria.

Under US plans, about a quarter of the US 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.

The impact of high food commodity prices on retail food prices is clearer in developing countries than wealthy nations.

The proportion of total funds that households use to pay for food varies hugely, from more than 60 percent in Bangladesh, to 27 percent in China and just 10 percent in the United States or Germany, 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.

(Additional reporting by Sybille de la Hamaide)

(Editing by Christopher Johnson)


Story by Brian Love


REUTERS NEWS SERVICE