By Sean O'Grady, Economics Editor
A food crisis could overtake the world in 2011, according to the Food and Agriculture Organisation, an agency of the United Nations.
Climate change, speculation, competing uses such as biofuels and soaring demand from emerging markets in East Asia are the factors that will push global food prices sharply higher next year, claims the FAO.
The FAO warns the world to "be prepared" for more price hikes and volatility if production and stocks do not respond. Price hikes of 41 per cent in wheat, 47 per cent in maize and a third in sugar are foreseen by the FAO. The last time that happened it sparked riots from Mexico to Indonesia.
In its latest Food Outlook the FAO says that the prices of many staple crops will rise by up to half next year, with many returning to the peaks seen during the food crisis of 2008, or even exceeding them in some cases. Apart from driving inflation higher in Britain and the rest of the Western world, another bout of food price hyperinflation has grim implications for the poorest people on the planet, even now hardly able to afford to feed themselves.
The FAO's broad global index of food prices has risen to 197.1 points, up about 5 per cent on the previous month alone, and already beyond the levels seen in the initial stages of the prices spikes in 2007 to 2008.
The report states: "Following a series of unexpected downward revisions to crop forecasts in several major producing countries, world prices have risen alarmingly and at a much faster pace than in 2007-08.
"For major cereals, production must expand substantially to meet utilisation and to reconstitute world reserves and farmers are likely to respond to the prevailing strong prices by expanding plantings."
The main obstacle identified by the FAO standing in the path of such an expansion in food production is the potentially more lucrative use of crops for biofuels and non-grain or non-food crops such as sugar, cotton and soya; "Against this backdrop, consumers may have little choice but to pay higher prices for their food. With the pressure on world prices of most commodities not abating, the international community must remain vigilant against further supply shocks in 2011 and be prepared."
Environmentalists will be especially concerned that the FAO explicitly acknowledges climate change as a factor in jeopardising food supplies. The FAO say that "adverse weather effects are undoubtedly a primary driver of wheat production shortfalls and, with climate change, may increasingly be so". If that does indeed prove to be the case then food prices seem set for a rise to levels unprecedented in modern times.
Wheat rust, a long-term problem for cereals farmers, has become an even more intractable enemy. It can have devastating effects. The last major set of epidemics in North America during the 1950s resulted in more than 40 per cent of the wheat crop being lost. A "new virulent form", designated as Race Ug99 has been spreading from East Africa, and is "migrating and mutating rapidly". "Most global commercial wheat cultivars are susceptible to Ug99" say the FAO, and "in addition, new, highly aggressive races of stripe rust are devastating wheat crops in several regions".
Recognising the role that speculators can play in pushing prices and volatility higher in crops not covered by restrictions on their activities, the Fao's chief grains economist Abdolreza Abbassian, said: "There is no doubt speculative activities have brought into the market a great deal of volatility." But he added there was "no proof" that speculators have driven up prices to near record levels.