Commodity prices to remain high
May 30, 2008
by FoodBusinessNews.net Staff
WASHINGTON — While agricultural commodity prices should drop some from their recent record levels during the next 10 years, prices will stay well above the average of the past decade, the United Nation’s Food and Agriculture Organization and the Organization for Economic Co-operation and Development said in an agricultural outlook.
The report also said prices may become more volatile because stock levels are expected to remain low as some of the demand for agricultural commodities becomes less responsive to price changes. Also, the recent increase in investment funds on commodity futures markets might become an additional factor in prices, and climate change could affect crop production and supply.
"The way to address rising food prices is not through protectionism but to open up agricultural markets and to free up the productive capacity of farmers, who have proven repeatedly that they will respond to market incentives," said Angel Gurria, O.E.C.D. secretary-general. "Governments can also do more to foster growth and development in poor countries so as to improve the purchasing power of the most vulnerable food buyers."
Factors leading to higher prices include expanding demand for biofuel, drought in grain-producing regions, high oil prices, changing diets, urbanization, economic growth and expanding populations.
At the O.E.C.D. Ministerial Council Meeting in Paris next week, food prices and their impact on the world economy will be one of the issues addressed. In addition, world leaders will meet at F.A.O. headquarters in Rome to discuss policies and strategies on how to improve and ensure world food security and re-launch agriculture in rural communities.
"Coherent action is urgently needed by the international community to deal with the impact of higher prices on the hungry and poor," said Jacques Diouf, director-general of the F.A.O. "Today, some 862 million people are suffering from hunger and malnourishment — this highlights the need to re-invest in agriculture. It should be clear now that agriculture needs to be put back onto the development agenda."