UN predicts more volatile food prices

UN predicts more volatile food prices

The United Nations in an annual report on food insecurity says food prices are likely to become more volatile in coming years, increasing the risk that more poor people in import-dependent countries will go hungry.

The report by the Food and Agriculture Organisation, the World Food Programme and the International Fund for Agricultural Development predicts food price volatility featuring high prices, which are likely to continue and possibly increase.

Possible dramatic price swing

The global food price indices, which hit record highs in February, were a factor in the Arab Spring of unrest in North Africa and the Middle East.

Prices have since eased but the UN report said economic uncertainty, low cereal reserves, closer links between energy and agriculture markets and rising risks of weather shocks were likely to cause more dramatic price swings in the future.

"Demand from consumers in rapidly growing economies will increase, population continues to grow, and further growth in biofuels (displacing food crops) will place additional demands on the food system," the report stated.

Africa’s vulnerability  

The report said that poor farmers and consumers in small importer countries, particularly in Africa, would be more vulnerable to shortages as a result.

It said short-term price swings had long-term impacts on development, depriving young children in vulnerable areas of key nutrients, which permanently cut their future earning capacity and increased the likelihood that they would remain poor.

The report found that many countries in Africa and other import-dependent regions continued to suffer problems caused by the world food and economic crises of 2006-2008.

And it said crises such as the current famine in the Horn of Africa were challenging the UN goal of cutting the number of people suffering hunger to roughly 600 million people by 2015, compared to 1.02 billion in 2009.

In 2010, the United Nations said the number had fallen for the first time in 15 years, to 925 million.

The world body did not update the annual figure in the latest report, saying it was reviewing its methodology and wanted to start providing more timely updates.

Effective strategies

“Safety nets such as food aid are crucial to tackling the problem, coupled with long-term investment in agriculture and improving resilience for farmers.

“Developing better irrigation, land management and seeds would all help to reduce production risks and mitigate price volatility,” it added.

Analysts have also called for improved storage system in Africa to help store farm produce for future use.

The report concluded that predictable policies and openness to trade were more effective strategies for governments than export bans and other restrictive policies, which risk increasing volatility and high prices on international markets.

REUTERS/Williams