(Bloomberg News) Record food prices are likely to be sustained this year because of high oil costs and smaller harvests, said the United Nations Food & Agriculture Organization.
"The potential risk is crude oil may continue to go higher, and if floods and drought happen again, we'll face further price increases," Hiroyuki Konuma, the FAO's regional representative in Asia, said in an interview today. "Now we're in a much better situation than the crisis in 2008."
Global food costs rose to an all-time high in February, according to an index compiled by the FAO. The increase has contributed to riots across North Africa and the Middle East that toppled leaders in Egypt and Tunisia. Prices surged as bad weather ruined crops from Canada to Australia and Russia banned grain exports after its worst drought in a half-century.
"We will get an increase in production but not sufficient to ease the market," said Abdolreza Abbassian, a senior FAO economist. "High, volatile prices will continue in 2011 and even in 2012," he said in a video briefing today.
An index of 55 food commodities rose 2.2 percent to a record 236 points last month, from 230.7 in January, the UN said March 3. Wheat rose 60 percent in Chicago in the past year, corn gained 92 percent and rice added 5.4 percent.
Turmoil in oil-producing countries including Libya has pushed crude above $100 a barrel. Higher crude prices make biofuels produced from crops more competitive, while raising the cost of tractor fuel and fertilizer for farmers.
Global food prices probably will rise in the first half of this century because of an expanding population and higher incomes, slower crop-yield growth and the effect of climate change, Ross Garnaut, the Australian government's climate-change adviser, said last week in Canberra.
Corn and wheat are under pressure from supply shortages as climate change and natural disasters have reduced production, leading to higher food prices, Konuma said.
"We have to be extremely cautious about what is going to come in 2011-2012," Abbassian said. "Spring is going to be extremely critical, when farmers will decide what crop they're going to plant. In many major producing regions, we have already hit maximum acreage. So the war is going to go on in terms of acreage."