MercoPress. South Atlantic News Agency

FAO emergency meeting to address soaring prices of cereals

Wheat prices have soared 60-80% since July while maize spiked about 40%.

Experts from more than 75 FAO Member States agreed Friday that while there were no grounds for complacency, there was no indication of an impending world food crisis. They proposed exploring new measures to check food price volatility and manage associated risks.

Concluding a day-long special meeting in Rome the experts recognized that unexpected price hikes “are a major threat to food security” and recommended further work to address their root causes.

The recommendations, put forward by the Inter-Governmental Groups (IGGs) on Grains and on Rice, came as FAO issued a report showing that international wheat prices have soared 60-80% since July while maize spiked about 40%.

The meeting said that “Global cereal supply and demand still appears sufficiently in balance”, adding, “unexpected crop failure in some major exporting countries followed by national policy responses and speculative behaviour rather than global market fundamentals have been the main factors behind the recent escalation of world prices and the prevailing high price volatility.”

Among the root causes of volatility, the meeting identified “Growing linkage with outside markets, in particular the impact of ‘financialization’ on futures markets”. Other causes were listed as insufficient information on crop supply and demand, poor market transparency, and unexpected changes triggered by national food security situations, panic buying and hoarding.

The Groups therefore recommended exploring “alternative approaches to mitigating food price volatility” and “new mechanisms to enhance transparency and manage the risks associated with new sources of market volatility”.

Some of these issues will be considered at an upcoming meeting of the FAO-based Committee on World Food Security (CFS).

Other IGG proposals included intensifying FAO information-gathering and dissemination at all levels. The meeting urged capacity building in areas such as the monitoring of planting intentions, crop development, domestic market information and the different dimensions of futures markets behaviour, including the involvement of non commercial traders.

In conclusion, the meeting recalled that at the 2009 World Summit on Food Security hosted by FAO Member Countries had agreed “to refrain from taking measures that are inconsistent with the WTO rules, with adverse impacts on global, regional and national food security”. It expressed sympathy for countries recently struck by natural disasters.
Data on the most recent grains price increases was contained in FAO’s quarterly report on the cereals supply and demand outlook, Crop Prospects and Food Situation, published Friday.

It forecast 2010 global cereal production at 2 239 million tonnes, only one percent lower than last year and the third largest crop on record. Reduced output of grains in the Commonwealth of Independent States (CIS) countries accounted for most of the decline.

In contrast with the steep increases in wheat (by 60-80 percent) and maize (by 40 percent) prices, the report said rice prices rose by only seven percent from July to September. But even at these higher levels cereal prices were still one third below their peaks in 2008, FAO noted.