Food Prices 1990-2008

Global Food Crisis: Food prices are not expected to fall back to pre-crisis levels for at least the next 10 years, according to a report that will be published in Paris on Thursday, May 29th.

The report, by the Organisation for Economic Co-operation and Development (OECD) and the UN’s Food and Agriculture Organisation (FAO), will say food prices have moved to a “higher plateau” because of rising demand from the biofuels industry and developing countries such as China.

But the Agricultural Outlook 2008-2017, does offer a respite in the short term, forecasting prices will ease from this year’s record levels, according to the Financial Times.

“Food prices would be considerably higher in nominal terms than in the past but below the current records,” said an official familiar with the report to the FT. Compared with average prices for 2005-07, the report forecasts that in 2017 the price of wheat, adjusted for inflation, will be 2 percent higher, rice 1 per cent higher and corn 15 percent higher. Oilseed prices are expected to be up 33 percent.

The price projections imply falls from the current records but suggest that food inflation will continue to be a long-term problem, particularly for poor countries.

The FAO says that agricultural commodity prices rose sharply in 2006 and 2007 and continued to rise even more sharply in the first three months of 2008. While the FAO Food Price Index, covering 55 commodities, rose, on average, 8 percent in 2006 compared with the previous year, it increased by 24 percent in 2007 compared to 2006. Currently, the increase in the average of the index for the first three months of 2008 compared to the same three months in 2007 stands at 53 percent. The continuing surge in prices is led by vegetable oils, which on average increased by more than 97 percent during the same period, followed by grains with 87 percent, dairy products with 58 percent and rice with 46 percent. Sugar and meat product prices also rose, but not to the same extent. Recent large increases in some commodity prices point also to increased volatility and uncertainty in the current market environment.

Wheat prices have dropped 40 percent since their February record; soyabean prices have also fallen and corn and rice prices have stabilised at around their recent record levels.

The FAO Food Price Index in April averaged 218.2, down marginally from 218.4 in March and still 54 percent more than in April 2007. Prices of most food commodities started to show some declines after reaching their peaks in March; but rice prices kept rising also in April.  With early prospects for most basic foods pointing to generally larger production in 2008, food prices, as measured in terms of average international prices of basic food commodities, seems to be declining further in May.

“Without exception, average real prices are likely to remain above those observed during 1985-2007,”said the report summary. The OECD said the projections were preliminary numbers.

FAO report SOARING FOOD PRICES: FACTS, PERSPECTIVES, IMPACTS AND ACTIONS REQUIREDprepared for the Rome conference on World Food Security: the Challenges of Climate Change and Bioenergy to be held June 3-5, 3008.