Wednesday, September 22, 2010

Importers Fear Repeat Of 2007-8 Food Crisis-FAO Official

Sharp increases in grain prices are sparking concerns that the 2007-08 food price spike in importing nations could be repeated, an economist with the United Nation's Food and Agriculture Organization said Tuesday.
Abby Abbassian told Dow Jones Newswires that the surge in grain markets prices in recent days is "unlikely to recede" until next year due to a tightening of supplies in feed markets and continuing uncertainty over weather-risks.
Markets are also likely to remain high and volatile until more concrete information emerges on the progress of next season's crop plantings in Russia said Abbassian, who is also secretary to the Intergovernmental Group on Grains.
"Importing countries are getting nervous--they see some more resemblances with 2007-8," he said. "High prices will become a major problem for many countries in North Africa and sub-Saharan Africa."
European corn prices jumped to six-week highs Monday as lower yields in the U.S.--the world's largest grower and exporter of corn--sparked concerns that supply may not be able to meet growing demand from livestock farmers looking for alternative feed supplies to wheat.
"If corn remains at these high levels for the next few months this could spill into wheat and the whole group of major cereals could stay at such high levels into the spring of 2011," said Abbassian.
Surging grain prices in recent weeks have raised the specter of 2008, when record food prices sparked widespread riots from Haiti to Bangladesh. Last month, riots over a hike in the price of bread in Mozambique left seven dead and hundreds more injured.
The FAO Food Price Index averaged 176 points in August, up nearly nine points from July and its highest level since September 2008, but still 38% off its peak in June 2008.
The FAO attributed the index's rise to a jump in the cost of wheat, which has increased more than 60% since the start of July after severe drought in the Black Sea region prompted Russia, the world's third-largest wheat exporter, to ban grain exports.
Grain price increases are particularly acute for countries in the Middle East and North Africa region, which rely heavily on imports to feed their fast-growing populations. According to the U.S. Department of Agriculture data, the region's wheat and corn imports jumped from 45 million tons in 1960 to 608 million in 2010 as governments responded to a tripling in the region's population in the same period.
Although officials insist the current rally is not a repeat of two years ago, as higher grain stock levels will cushion further supply shocks, Abbassian warned that further disruption to production in the Black Sea region could place severe strain on the market.
"From January onwards, every eye will be on plantings in the Black Sea," he said. "This year the CIS [Commonwealth of Independent States] countries, especially Russia, could deal with production problems.
"But if this happens again next year Russia would be thinking about importing feed. Any hint that this is likely could send prices even higher." 
Dow Jones Newswires

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