OECD: Food price hikes to continue for another decade

Farmers harvest wheat in suburbs of Hyderabad, Pakistan. Wheat production this year too is expected to remain low, the Pakistani government said. File photo

Poor people in developing countries will continue to be squeezed by spiraling food prices for another decade, the Organization for Economic Cooperation and Development (OECD) and United Nations Food and Agriculture Organization (FAO) said Friday.

In their 2011-2020 Agricultural Outlook the FAO and the OECD, a think-tank that tracks economic developments in 34 countries, forecast that real prices for cereals could grow on average by 20 per cent over the coming decade, compared to 2001-2010.

Meat prices could increase by up to 30 per cent, they said. While prices will continue to rise, growth in global yields will slow, the report said.

Farm output is expected to grow 1.7 per cent annually over the next decade, down from the 2.6 per cent growth rate of the past 10 years.

“While higher prices are generally good news for farmers, the impact on the poor in developing countries who spend a high proportion of their income on food can be devastating,” OECD Secretary-General Angel Gurri said in a press statement.

Increasingly erratic weather and price speculation are blamed for a spike in foodstuff prices over the past year.

A severe drought in Russia, Ukraine and Kazakhstan caused wheat prices to spiral, driving up the cost of bread and animal feed, while falling stocks caused sugar to reach a 30-year high in February.

The developments have raised fears of a repeat of the food riots that convulsed several developing countries after food prices peaked in 2008. One in seven people worldwide - 925 million people – go hungry, according to anti-poverty charity Oxfam.

Food prices were already a factor behind some of the revolutions in the Arab world this year.

The OECD-FAO report said good harvests this year should push down prices in the short-term, but warned the relief would be short-lived.

FAO Director General Jacques Diouf said the key to containing price volatility was boosting development in agriculture to improve yields, particularly from smallholdings in developing countries.

The OECD and FAO called on the Group of 20 (G20) developed and emerging markets to take steps to improve output, eliminate trade-distorting policies and improve transparency in trade in agricultural products, among other measures.

French President Nicolas Sarkozy, whose country will host a G20 leaders summit in November in Cannes, has likened the speculation in commodities to the speculation in financial markets that caused the

meltdown of 2008.