MercoPress. South Atlantic News Agency

FAO warns countries against a repeat of the 2007/08 food prices crisis

Export restrictions on grains made grains dearer and helped trigger food riots

The world could face a food crisis of the kind seen in 2007/08 if countries restrict exports on concerns about a drought-fuelled grain price rally, the UN food agency FAO warned, after reporting a surge in global food prices in July.

A mix of high oil prices, growing use of bio-fuels, bad weather, soaring grain futures markets and restrictive export policies pushed prices of food up in 2007/08, sparking violent protests in countries including Egypt, Cameroon and Haiti.

Concern about extreme hot and dry weather in the US Midwest sent corn and soybean prices to record highs last month, driving overall food prices higher again and reversing the Food and Agriculture Organisation's forecast for declines this year.

“There is potential for a situation to develop like we had back in 2007/08” said FAO senior economist and grain analyst Abdolreza Abbassian.

“There is an expectation that this time around we will not pursue bad policies and intervene in the market by restrictions, and if that doesn't happen we will not see such a serious situation as 2007/08. But if those policies get repeated, anything is possible.”

A number of major producers imposed various restrictions on exports in an attempt to control domestic prices in the 2007/08 crisis, including outright bans as well as quotas or higher tariffs on exports of foods including rice, corn and wheat.

The restrictions reduced supply on international markets, helping to drive prices even higher.

Grain markets have been boosted recently by speculation that Black Sea grain producers, particularly Russia, might impose export restrictions after a drought there hit crops.

Markets drew a little comfort from official Russian comments on Wednesday that the country saw no grounds to ban grain exports this year but did not rule out protective export tariffs after the end of the 2012 calendar year.

The FAO Food Price Index, which measures monthly price changes for a food basket of cereals, oilseeds, dairy, meat and sugar, averaged 213 points in July, up 6% from 201 points in June, the FAO said in its monthly index update.

The rise, which followed three months of declines, was driven mainly by a surge in grain and sugar prices, while meat and dairy prices were little changed, the FAO said.