Food prices may rise by up to 20%, warns UN

Food prices may rise by up to 20%, warns UN

Poor harvests put global food reserves under pressure,

with African and Asian countries likely to be worst hit

by John Vidal

Prices of wheat, maize and many other foods traded internationally
have risen by up to 40% in just a few months.
Photograph: Simon Maina/AFP/Getty Images



The UN today warned that food prices could rise by 10%-20% next year after poor harvests and an expected rundown of global reserves. More than 70 African and Asian countries will be the worst hit, said the Food and Agricultural Organisation in its monthly report.

In its gloomiest forecast since the 2007/08 food crisis, which saw food riots in more than 25 countries and 100 million extra hungry people, the report's authors urged states to prepare for hardship.

"Countries must remain vigilant against supply shocks," the report warned. "Consumers may have little choice but to pay higher prices for their food. The size of next year's harvest becomes increasingly critical. For stocks to be replenished and prices to return to more normal levels, large production expansions are needed in 2011."

Prices of wheat, maize and many other foods traded internationally have risen by up to 40% in just a few months. Sugar, butter and cassava prices are at 30-year highs, and meat and fish are both significantly more expensive than last year.

Food price inflation – fuelled by price speculation, the searing heatwave in Russia in the summer and heavy trading on futures markets – is now running at up to 15% a year in some countries. According to the UN, international food import bills could pass the $1tn mark, with prices in most commodities up sharply from 2009.

Extreme volatility in the world markets has taken the UN by surprise and forced it to reassess its forecasts for next year. "Rarely have markets exhibited this level of uncertainty and sudden turns in such a brief period of time. World cereal production this year, which is currently put at 2,216m tonnes, is 2% below 2009 levels, 63m tonnes less than the forecast reported in June," said the authors.

"Contrary to earlier predictions, world cereal production is now forecast to contract by 2% rather than to expand by 1.2%, as anticipated in June," they said.

Global food reserves, which currently stand at around 74 days, are now expected to decrease significantly in the next few months. "Cereal reserves may drop by around 7%, barley nearly 35%, maize 12% and wheat 10%. Only rice reserves are expected to increase, by 6% next year," said the report.

Much now hangs on next year's harvests, it said. "International prices could rise even more if production next year does not increase significantly – especially in maize, soybean and wheat. Even the price of rice, the supply of which is more adequate than other cereals, may be affected if prices of other major food crops continue climbing."

But food analysts said the prospects for a bumper world harvest next year were slim. "2011 will not be a good harvest. The condition of winter wheat crops is not good. Neither the US nor Russia are expecting good harvests," said Lester Brown, founder of the Washington-based Worldwatch Institute.

"The poorest will suffer the most because they feel the effect of price rises directly. In the US and Europe, wheat may only make up 10% of the price of a loaf of bread."