Monday, September 27, 2010

FAO sees no signs of global food crisis

Put aside all speculations of a looming food crisis, A special UN meeting on about high food prices said the outlook for this year's harvests is good and cereal stocks are adequate.

Delegates at the meeting blamed the hikes on speculation, futures markets and national responses to crop failure but did not blame Russia for its export ban after a drought-caused wheat shortfall.

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They discussed a grain export ban by Russia and its impact on cereal markets, although experts said good harvests should help prevent a repeat of the price panics of a few years ago.

Russia, one of the world's largest wheat exporters, initiated the ban earlier this year to protect domestic markets. Experts from more than 75 countries discussed the ban and its impact on cereal markets.

UN officials, citing the latest crop assessments, sought to reassure governments that good harvests should help buffer countries from the violence sparked by price panics of a few years ago.

Participants at the talks agreed that "while there were no grounds for complacency, there was no indication of an impending world food crisis," said the Food and Agriculture Organization,.

A UN report released during the meeting found that while grain prices have surged in part because of the ban, the outlook for this year's harvests is good and cereal stocks are adequate. Russian grain company executives and government officials were among meeting participants.

Riots recently erupted in Mozambique over high food prices, prompting fears that a crisis, like the one of 2007-08, which sparked riots in several impoverished countries, was possible. But UN officials have stressed that the current situation is not as bad as before.

The FAO's latest assessment of grains and rice concluded that this year's cereal production, bolstered by stock from last season, should cover the world's projected needs for this year and next.

International wheat prices kept rising last month even though cereal production for this year is expected to be the third largest ever, and the global harvest was only 1 percent less than last year's, the report said.

Meeting participants concluded that "national policy responses" and speculation, not "global market fundamentals," were the main factors for the escalating prices and volatility following "unexpected crop failure in some major exporting countries."

They said root causes of the volatility included "growing linkage with outside markets, in particular the 'financialization' on future markets."

Except for North Africa, Africa in general was expected to have favorable harvest. China and India are anticipating record crops, although much of that harvest will go to feed those countries' populations.

Also helping to boost the wheat supply are good production prospects for Australia. The FAO said the latest forecast for world cereal stocks in 2011 has been revised upward to nearly 184 million tons, 3 million tons more than previously anticipated, but still down 9 percent from their eight-year high opening level.

The Ukrainian government said Friday that it would not restrict grain exports, Reuters reported. Traders have complained that Ukraine, one of the world's top grain exporters, was curbing wheat exports through lengthy customs checks since July in expectation of a poor harvest after a summer drought.

Tom Vilsack, the US secretary of agriculture, has also played down recent increases in the price of wheat, corn and other food commodities, saying the world is not on the brink of a rerun of the recent food supply crisis.

Vilsack said food stocks were at higher levels than during the 2007-08 food crisis, which saw record prices for agricultural commodities and food riots in emerging countries.

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