Report Sees Decade of High Food Prices - NYTimes.com

Record prices for farm crops should gradually come down, but they will remain substantially higher than average over the next decade because of fundamental changes in demand, according to a report released Thursday by the United Nations and the Organization for Economic Cooperation and Development.

Because the recent spike in crop and food prices has been caused in part by temporary factors like drought, the report predicted that prices should decrease as weather conditions return to normal and crop yields improve.

“At least we hope they are temporary,” said Angel Gurria, secretary-general of the O.E.C.D., alluding to the potential impact of climate change on agricultural production.

The report was critical of government policies that encouraged biofuel production, saying their environmental, energy security and economic benefits were modest at best and “sometimes even negative.”

And the report suggested that those policies should be re-examined in light of the current food crisis, as should government trade policies like export bans that do not allow farmers to take advantage of higher global prices for agriculture commodities.

The report also encouraged countries that have balked at allowing genetically modified crops to reconsider their use as a way to improve yields.

In a related matter, the World Bank on Thursday announced that it would increase its spending on agriculture and food programs to $6 billion in the coming fiscal year, which begins on July 1, up from $4 billion. The additional money includes $800 million that has already been earmarked for Africa and an additional $1.2 billion to rapidly finance such things as seeds, fertilizer and irrigation for small-scale farmers, food-for-work programs and school feeding initiatives.

“These initiatives will help address the immediate danger of hunger and malnutrition for the 2 billion people struggling to survive in the face of rising food prices,” the president of the World Bank Group, Robert B. Zoellick said, in a statement.

According to the report by the O.E.C.D. and the Food and Agriculture Organization of the United Nations, released Thursday at a news conference in Paris, the anticipated causes of higher than average prices during the next decade include a doubling of biofuel production, higher fuel costs that increase the cost of producing crops and food and greater demand for food and animal feed in developing countries where incomes are rising.

Prices for vegetable oils are expected to remain the highest, 80 percent above the average from 1998 to 2007; wheat, corn and skim milk powder are anticipated to 40 to 60 percent higher; sugar, 30 percent; and beef and pork, about 20 percent. Biofuel production should account for about a third of the expected increases in prices for vegetable oils and grains.

But the authors of the report cautioned that crop prices may be more volatile because of less predictable weather patterns, the infusion of speculators in agricultural futures markets and the low levels of stockpiles of grains.

The projected increases in crop prices would have the most serious impact in poor countries, where food accounts for more than 50 percent of income and where higher prices are already pushing more people into malnourishment and starvation. Mr. Gurria said that the end of an era of cheap food was of considerable concern for the millions in the world earning less than $2 a day, and that there was an urgent need to provide more food aid to the poor.

The authors of the report encouraged increased investment in agriculture research and outreach programs in the least developed countries after years of declining support.

“Agricultural development was not given sufficient priority over the last decades, and its importance was underestimated,” said Jacques Diouf, secretary-general of the Food and Agriculture Organization of the United Nations.

The report was released in anticipation of next week’s summit of world leaders in Rome to address to the steep spikes in crop and food prices, which has sparked rioting in a number of developing countries.

It noted that agricultural production is shifting away from developed countries like the United States and Europe to developing countries, which are expected to dominate production and consumption of most commodities except for cheese, coarse grains and skim-milk powder. Consumption and production are growing faster in developing countries for all major farm commodities but wheat.

Growth in demand of meat is expected to increase 2.5 percent a year in developing countries, fueling the need for more grains for animal feed. Brazil is expected to increase its share of global meat exports to 30 percent of the total by 2017.

As part of the World Bank’s announcement on Thursday, Mr. Zoellick said $200 million of the $1.2 billion would be used as grants for countries most vulnerable to the food crisis. As part of that effort, he said $10 million grants were being distributed immediately to Haiti and Liberia, as well as a $5 million grant to Djibouti.

Report Sees Decade of High Food Prices - NYTimes.com

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